Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 20: Q. 26 (page 490)

Is international trade likely to have about the same effect on everyone’s wages?

Short Answer

Expert verified

No.

Step by step solution

01

Step1. Introduction

International trade is the exchange of goods and services across the global/international borders. It refers to the free trade across countries.

It accumulates trade wealth and gains, further enhancing the production due to capital accumulation. All of it induces production as a whole, thereby increasing the number of jobs and demand for labor.

02

Step2. Explanation

As the production demand increases, it shall create demand for labor, thereby creating job opportunities.

But the effect of job creation differs from one industry to another depending on the participation in the international trade. If an industry is associated primarily with exports of its product, the labor demand shall increase and such industries will create more jobs. This leads to an increased demand of labor in that industry, causing the wage rates in such specific industries to go up.

But, if an industry is hit by cheap imports, it won't be able to compete and stay its ground in the market, hence, jobs created would be less or it might even be the case that people loose jobs. In either of the case, the demand of labor falls, thus leading to a fall in wages.

But, industries on a whole benefit from international trade, pushing demand of labor up and hence the average wage rates.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Assume two countries, Thailand (T) and Japan (J),

have one good: cameras. The demand (d) and supply (s) for cameras in Thailand and Japan is described by the following functions: QdT

= 60 – P

QsT = –5 + 14 P

QdJ = 80 – P

QsJ = –10 + 12P

P is the price measured in a common currency used in both countries, such as the Thai Baht.

a. Compute the equilibrium price (P) and quantities

(Q) in each country without trade.

b. Now assume that free trade occurs. The free-

trade price goes to 56.36 Baht. Who exports and

imports cameras and in what quantities?

Microeconomic theory argues that it is economically rationale (and profitable) to sell additional output as long as the price covers the variable costs of production. How is this relevant to the determination of whether dumping has occurred?

Why do you think that the GATT rounds and, more recently, WTO negotiations have become longer and more difficult to resolve?

What is the general trend of trade barriers over recent decades: higher, lower, or about the same?

Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free