Question

Use the Stolper-Samuelson theorem to predict whether the following groups would prefer free trade or protection from imports (you will need to make assumptions about factor endowments and factor intensities). Provide the logic behind your prediction. For this one, you could answer in several ways — as long as your logic is consistent with Stolper-Samuelson.

A) Owners of steel manufacturing firms in Jamaica.

Jamaica is relatively capital-scarce, so owners of steel manufacturing firms in Jamaica (the people who own the physical capital to make steel) would likely [position] free trade, given that the production of steel is capital-intensive.

a)Oppose

b) Support

c) Be indifferent towards

B) Australian wheat farmers.

C) Mexican textile workers.

D) Owners of US aircraft manufacturing firms

Answer 1

(A) Correspondingly for Jamaican steel proprietors (as Steel imports from capital serious nations would be less expensive as they have relative favorable position in capital concentrated products) .

(b)Australian Wheat Farmers and Owners of Steel manufacturing firms in Jamaica will SEEK PROTECTION FROM IMPORTS. Since, according to SS Theorem, both these gatherings are proprietors of scant factor of creation in their separate nations. Therefore,wheat imports to Australia from creating nations would be a lot less expensive rather as those nations would be work escalated comparative with Australia and will have a relative preferred position when contrasted with work in Australia. Therefore, when exchange happens Wheat is bound to be imported from such nations into Australia, and thus, the creation of Wheat ranchers in Australia will perish, the profit for work in Australia will diminish. subsequently, they contradict exchange.

(C)Mexican Textile Workers and US Aircraft fabricating firms will SEEK HIGHER TRADE.

Since, according to SS Theorem, both these gatherings are proprietors of beneficial factor of creation in their particular nations, and their nations will have a relative preferred position with others while exchanging these items.

(D)Subsequently, these organizations being more productive, will appreciate admittance to the business sectors of its exchanging accomplice, and secure a relative bit of leeway, and before long catch higher offers in these business sectors, expanding returns on their capital. henceforth, they would look for higher exchange!