The Structure of Simple General Equilibrium Models

Jones, Ronald W.

doi:10.1086/259084

Cited by 1,095 publications

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“…For this reason, trade in intermediate inputs can have an impact on wages and employment that is much greater than for trade in final consumer goods. As we shall argue, trade in inputs has much the same impact on labor demand as does skill-biased technical change: both of these will shift demand away from low-skilled 1 Alternatively referred to as outsourcing Murphy, 1992, Feenstra andHanson, 1996), de-localization (Leamer, 1998), fragmentation (Deardorff, 2001;Jones andKeirzkowski, 1997, Arndt andKierzkowski, 2000), intra-product specialization (Arndt, 1997 and1998a,b), intra-mediate trade (Antweiler and Trefler, 1997), vertical specialization (Hummels, Ishii, and Yi, 2001), and slicing the value chain (Krugman, 1995), this phenomena refers to the geographic separation of activities involved in producing a good (or service) across two or more countries. The term "production sharing" was coined by management consultant Peter Drucker ("The Rise of Production Sharing, " The Wall Street Journal, March 15, 1977), as we have adopted in our title.…”

Section: Introductionmentioning

confidence: 99%

Global Production Sharing and Rising Inequality: A Survey of Trade and Wages

Feenstra¹,

Hanson²

2001

295

254

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Section: Introductionmentioning

confidence: 99%

Global Production Sharing and Rising Inequality: A Survey of Trade and Wages

Feenstra¹,

Hanson²

2001

295

254

View full text Add to dashboard Cite

“…Therefore, to derive the effect of such a change on w and r, we use Jones (1965). The following equations incorporate proportional changes in the variables denoted by '^'.…”

Section: Post-emigration Production Structurementioning

confidence: 99%

Emigration, Wage Inequality and Vanishing Sectors

Marjit

Kar

2009

SSRN Journal

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Emigration leads to finite changes in structure of production and sectors vanish because they cannot pay higher wages. Does emigration of one type of labor hurt the other non-emigrating type in this set up? We demonstrate various scenarios when real income of the emigrating and the non-emigrating type do not move together and in the process generalize some of the existing results in the literature. In particular emigration can lead to a drastic change in the degree of inequality depending on which sectors survive in the post-emigration scenario. IntroductionIn recent years a body of literature has emerged analyzing the impact of international labor mobility on wage distribution in the source country. In particular, this literature addresses the question how emigration of skilled and unskilled labor from low wage to high wage countries affects the degree of wage inequality in the low wage country. Marjit and Kar (2005) provide a simple model and derive an intuitively appealing condition under which wage distribution may go against the residual workers of the emigrating group. Using a specific factor model, this study shows that regardless of the emigrating category -skilled or unskilled -return to capital declines following emigration and subsequently raises the return for workers of the non-emigrating type.Indeed, in some cases residual members of the non-emigrating factor may benefit more than the emigrating group affecting wage inequality in an unexpected manner. These and various other issues that wage inequality spawned by factor mobility discussed so far necessitate a synthetic analysis. We therefore offer a model with greater generality within which many of these results should hold. In addition, we demonstrate that factor mobility can be critically responsible for 'vanishing' sectors in the source Between two alternative occupations a factor will always choose the one that promises higher rate of return. As factors of production are allowed free entry and exit in a global space the general lesson from trade theory suggests that the set of goods produced in a country may change along with that. In particular, given world prices certain production activities/services might turn out to be unprofitable for certain countries. Such 'finite' changes in trade theory do not receive much attention but surely opens up interesting possibilities. Recently, Jones (1996) and Jones and Findlay (2007, Letters) have considered implications of vanishing sectors in a different context. Finite changes typically refer to circumstances when the output contraction is fairly drastic.Jones and Marjit (1992) provide an interesting perspective in a many factor many commodity world. In specific factor models (Jones, 1971) no sector can completely vanish because of the necessity of employing the specific factor. Of course, they do not consider the possibility that such specific factor is internationally mobile.In a standard Heckscher-Ohlin framework with two factors, however, a vanishing sector is clearly feasible under...

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“…As neatly laid out in Jones (1965) indicates the cost-minimizing input of factor i in producing one unit of good j.…”

Section: Stolper-samuelson and The Simple General-equilibrium Modelmentioning

confidence: 99%

Protection and Real Wages: The Stolper–Samuelson Theorem

McCulloch¹

2006

Samuelsonian Economics and the Twenty-First Century

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This chapter examines the Stolper–Samuelson's Theorem under varying conditions and assumptions. Using a previous reformulation of the theorem, it demonstrates that when the relative prices for labor-intensive goods fall, real wages decline in that sector, and the returns to other factors increase, resulting in a redistribution effect. The model had been robust in its predictions. When the number of goods and factors is increased, at least one factor is likely to gain or lose. The model is relevant for modern policies such as the Trade Adjustment Assistance and Unemployment Insurance Programs that assist distressed industries, where compensation can make a difference for individuals or firms that are hurt from free trade. The model is also relevant in the political arena where owners of factors vote or lobby. It has shown strength in explaining patterns of protection across countries.

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The Structure of Simple General Equilibrium Models

Cited by 1,095 publications

References 0 publications

Global Production Sharing and Rising Inequality: A Survey of Trade and Wages

Global Production Sharing and Rising Inequality: A Survey of Trade and Wages

Emigration, Wage Inequality and Vanishing Sectors

Protection and Real Wages: The Stolper–Samuelson Theorem

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