Abundant Factor Of Production Research Articles

The Impact of Chinese Imports on Indian Wage Inequality

The paper seeks to address the growing inequality in wages between skilled and unskilled workers and between male and female workers in India due to a growing import surge from China. The study on wage movements of skilled versus unskilled workers helps us to understand how imports from India’s largest trade partner have contributed to relative factor returns in the country’s most abundant factor of production. The consideration of wage divergence between male and female workers helps us in determining how significant China’s trade is in addressing gender inequality in India’s labour market. Our analysis reveals that the import surge from China has minor effects on the growing wage difference between skilled and unskilled workers. However, the effect of the Chinese import surge on wage divergence between male and female workers is significant. The existing literature on the effects of international trade on India labour market is largely silent on the considered aspects.

Winners or losers? Workers in transition economies under globalisation

ABSTRACT The objective of this study is to investigate if workers in transition economies have been winners or losers of globalisation. We base our key argument on the postulates of the Heckscher–Ohlin model, whereby countries benefit from the production and export of the good produced with the abundant factor of production. We analyse the period 1996–2016 in 25 transition economies of Central, Southeast Europe and the Commonwealth of Independent States. Globalisation is represented through the manufacturing export and FDI in GDP and is argued to be endogenous, at least partially, to workers’ conditions. Political stability and rule of law are used as exclusion restrictions. We rely on the conditional mixed process procedure to estimate the coefficients. Results suggest that workers in Central European transition economies are the winners of globalisation as it created mainly high-skill and well-paid jobs. Workers in the Commonwealth of Independent States are the losers of globalisation which likely happened through reducing wages, offering inadequate working conditions and dampening marketplace bargaining power. Finally, workers in Southeast Europe stand in the middle: they are winners as globalisation created expanded economic opportunities for them, but losers in the sense of workplace structure and wages.

Free mobility of capital and Labor force in a two-country model: The dynamic game for growth

In this paper, we consider a two-country and two-sector economy, where firms can choose to be innovative or not innovative, and workers to be skilled or unskilled. Using a dynamic game, we argue that exploiting the comparative advantages a country has in producing goods that use the most abundant factor of production, free mobility of capital and labor is beneficial for economic growth. However, if a country has a comparative advantage in a sector that uses intensely unskilled labor (which is the case of several underdeveloped economies), a poverty trap may arise. For this reason we argue that national Governments must ensure the technological development to improve competitiveness and therefore a social optimal use of the comparative advantages.

An Empirical Analysis of Dynamic Competitiveness in Africa

Specializing in the export of products made intensively from relatively abundant factors of production and in the import of those made from relatively scarce ones has had a lot of traction in international trade practice. Ample evidence, however, now shows that some nations are gaining a comparative advantage in new areas that they never had before. Consequently, the traditional policy option of many African countries of continuing to specialize in areas in which they already have a comparative advantage (such as exports of primary commodities) is complemented with that of moving to new areas (such as high technology manufacturing) in which they could gain some advantage even though they may not enjoy any at the moment. Trade strategies are therefore now being formulated specifically to transition economies from a state of non-competitiveness to a state of relative competitiveness. This transitioning is what we call dynamic competitiveness in this paper. Empirically, we determine this by analysing the growth of the World Economic Forum’s Global Competitiveness Index of 27 African countries. This is complemented with the analysis of the growth of trade and transport costs using the World Bank Doing Business data. The study finds, among others, that even though the selected Sub-Saharan African countries are improving their (static) competitiveness over time, they cannot be said to be achieving dynamic competitiveness.

Examination of suitability of factor endowment theory with the reflection on transportation cost in international business

International Business is a device which provides a support of convenience of exchanging goods or services or both between two or more countries. More prominently in a condition, one good is available abundant in one country and in the identical point of time there is a dearth and much demand from another country for the same or similar goods. During 18th and 19th century a number of international trade theories came into force with the aim of identifying course of action for smooth carrying of business by countries through export and import. Factor Endowment Theory is one of international trade theories focuses on effective international business with the optimum utilization of factors of production. The Factor Endowment theory was contributed by the Swedish Economists Eli Heckscher and Bertil Ohlin. It focuses on smoothening of international business in terms of exports and imports by using abundant factors of production and attaches the restraint on trade in order to get comparative advantage. One country must produce those products associated with such country‘s abundant factor of production and import those products which are difficult to produce or the production leads to high product cost on account of lack of associated factor of production. This argument is justified on the premise that the exporting country is capable of producing the product with relatively low cost by effectivelyexploiting the associated abundant factor of production. Factor Endowment Theory holds valid only within the framework of assumptions. This paper examines the relationship between availability of abundant factors of production and international business with the profound connection with the transportation cost and essentially focuses on suitability of factor endowment theory with current trend.

Ethiopia’s Trade and Investment: Policy Priorities for the New Government

As Ethiopia’s new government begins work in September 2010, it is armed with a new plan: the Growth and Transformation Plan (GTP). Trade and foreign direct investment (FDI) figure in the new plan but less reliance is placed on FDI inflows than in the past and as much emphasis appears to be placed on import substitution as on export expansion to reduce the trade deficit. Ethiopia has tried different trade strategies in the past, the perennial goal being to diversify its exports to reduce dependence on coffee and other cash crops. Nonetheless, Ethiopia has a low share of trade in GDP, its exports continue to have limited diversification, and its trade deficit has widened significantly. This paper argues that Ethiopia’s trade performance has been held back by a combination of factors that are amenable to policy treatment, including very high trade costs due to poor trade logistics and burdensome official requirements, an unsupportive macroeconomic policy mix, and private sector under-development that is at least partially attributable to weaknesses in the microeconomic framework. By the same token, it argues that targeted infrastructure and regional cooperation developments, in conjunction with a tradefriendly macroeconomic policy and domestic administrative reforms would, properly sequenced, enable Ethiopia to use its abundant factor of production—cheap labour—to drive its development on a basis less vulnerable to the risks inherent in rain-based agricultural production, including participation in processing trade. On this basis, it identifies a set of priority initiatives for the new government.

Envy, Altruism and the International Distribution of Trade Protection

One important puzzle in international political economy is why lower-earning and less-skilled intensive industries tend to receive relatively high levels of trade protection. This pattern of protection holds even in low-income countries in which less-skilled labor is likely to be the relatively abundant factor of production and therefore would be expected in many standard political-economy frameworks to receive relatively low, not high, levels of protection. We propose and model one possible explanation: that individual aversion to inequality--both envy and altruism--lead to systematic differences in support for trade protection across industries, with sectors employing lower-earning workers more intensively being relatively preferred recipients for trade protection. We conduct original survey experiments in China and the United States and provide strong evidence that individual policy opinions about sector-specific trade protection depend on the earnings of workers in the sector. We also present structural estimates of the influence of envy and altruism on sector-specific trade policy preferences. Our estimates indicate that both envy and altruism influence support for trade protection in the United States and that altruism influences policy opinions in China.

Unemployment, Trade Liberalization and Adjustment in Post-Transition South Africa

Economic theory suggests that trade liberalization rewards relatively abundant factors of production — labor in most economically developing countries. In South Africa, trade liberalization has not benefited the locally abundant factor (unskilled labor). Instead, unemployment remains stubbornly high. The legacy of apartheid explains this surprising result; apartheid distorted factor markets (including patterns in land ownership, unionization, investment, infrastructural development and more). The gains from trade will remain elusive unless the Government engages in policies targeting flexibility in factor markets to support trade adjustment. ANC governments have introduced some policies along these lines, but have refrained from taking on certain politically powerful constituencies within their own party.

REVEALED PREFERENCE TESTS OF THE STOLPER?SAMUELSON THEOREM

This article conducts revealed preference tests of the Stolper-Samuelson theorem. If the Stolper?Samuelson theorem holds, one would expect to find a country's relatively scarce factor of production (in this case labor) harmed from trade liberalization and thus opposing trade liberalization. The reverse would be true for its relatively abundant factor of production (in this case capital). Therefore, this article examines representations made before the Canadian House of Commons committee studying the Canadian?U.S. Free Trade Agreement. Assuming representations coincide with the self-interest of the presenters, the effects of trade liberalization on factor returns are inferred. It finds strong support for the proposition that labor behaves as the Stolper?Samuelson theorem would predict and qualified support for capital behaving as the Stolper?Samuelson theorem would predict.

The Use of Input-Output Analysis to Determine the Appropriateness of Technology and Industries: Evidence from Bangladesh

Since the proportion of available capital to labor is low in LDCs compared to the developed countries, the most appropriate techniques for LDCs, from an economic point of view, are likely to be the laborintensive ones. If we suppose that there is a single most efficient technique for each industry, and if it technologically requires labor and capital in fixed proportions, the most appropriate industries for LDCs are likely to be the labor-intensive ones. This is because of the close correspondence between industries and their technological requirements. On an international scale this appropriateness is given some support by the Heckscher-Ohlin theorem of international specialization in production. As is well known, this theorem indicates (subject to various assusmptions) that countries should specialize in the production of goods that make use of their relatively abundant factors of production.' The aim of this paper is to identify appropriate industries for Bangladesh in view of the relative availability of labor and capital and taking into account the amount of labor and capital needed both directly and indirectly to produce output for each industry. Unfortunately, as specified below, a number of previous studies of appropriate techniques and industries have ignored the indirect requirements for labor and capital needed to produce the various intermediate products used in these industries. Interindustry analysis, based on the assumption that the adopted techniques require inputs to be combined in fixed

FACTOR ENDOWMENT, INNOVATION AND INTERNATIONAL TRADE THEORY

Comparative advantage theory, as specified in the Heckscher-Ohlin model, holds that nations export those commodities which intensively embody their relatively abundant factors of production. Factor endowment dictates world trade patterns in the general equilibrium models of international trade. The dynamic models of international trade, such as the product life cycle model, emphasize the role of innovation in determining trade patterns. Factor endowment also plays a role in these models. In particular, a wide body of literature ties innovative activity to relative factor cost levels. If innovators are responsive to relative factor costs, innovative activity may be directed towards those sectors with heaviest usage of the most expensive factors of production in an economy. If such innovation results in exports, trade patterns emerge which directly conflict with Heckscher-Ohlin expectations. The results of this study suggest that innovative activity tends to be concentrated in industries which intensively use a nation's relatively expensive factors of production. This finding holds an alternative explanation for the Leontief paradox, and suggests a wider role for factor endowment in international trade theory.

Factor Proportions and the Structure of Inter-Regional Trade: The Case of Japan

results.1 However, there exists little evidence in economic literature to support an alternative hypothesis of the pattern of trade based on the Heckscher-Ohlin (H-O) theory. The hypothesis, stated in a simple version amenable to empirical investigation, is that a country's exports require in their production a relatively intensive use of the country's relatively abundant factor of production.2 As is well known, Leontief [12; 13] found that the U.S. exports of 1947 and 1951 were generally more labor-intensive (relative to capital) than the corresponding competitive imports, contrary to what may be expected on the basis of the H-O theory. Subsequent investigations by other writers into the trade patterns of additional countries resulted in mixed (mostly negative)