technical change land quality and income distribution a general equilibrium analysis this paper investigates the distributional effects of technical progress in agriculture a small computable general equilibrium model is developed in which agricultural production occurs in two environments with fixed land resources of different quality the analytical structure permits not only the rate but also the factor biases of technical change to differ between environments distributional results are generated for several classes of households distinguished both by their ownership of factors and by their consumption patterns the results demonstrate that technical change produces distributional outcomes which are highly sensitive to its factor biases and to prior differences in land quality

the excise tax effects of the property tax abstract this paper constructs a theory of how differences across regions in property tax rates affect product prices and factor prices for a model where labor and capital are perfectly mobile between regions it is shown that consumers residing in different regions face the same nontraded good prices even when property tax rates differ across regions

trade and factor movements with three factors and two goods abstract with three factors and two goods there are two extreme and one middle factor regardless of technical complementaries in the individual production functions the extreme factors must be enemies and the middle factor the other factor s friend with constant product prices

economic efficiency of solar hot water policy in new zealand new zealand has recently followed the path of several other countries in promoting solar hot water shw systems in the effort to reduce greenhouse gas emissions yet the economic efficiency of large scale policies to encourage shw remains a pressing question for policymakers this paper develops an economic framework to examine policies to promote shw in new zealand including the current information training and subsidy policy the economic framework points to environmental energy security and average cost electricity retail pricing market failures as motivation for shw policy with the global climate change externality the most important of these the results indicate that domestic shw systems are close to being financially attractive from a consumer perspective but a more substantial subsidy policy would be necessary for shw to appeal to a wider audience such a policy is far more likely to have positive net benefits than a policy of mandating shw on all homes or all new homes in new zealand and could be justified on economic efficiency grounds under reasonable assumptions however this result reverses under an economy wide carbon trading system that internalizes the environmental externality

investment the current account and the relative price of non traded goods in a small open economy abstract this paper incorporates traded and non traded investment expenditure into an infinite horizon setting with optimizing economic agents extending previous research that has incorporated traded and non traded investment into a two period setting the paper analyzes the dynamic adjustment of the relative price of non traded output the market price of capital and the current account following exogenous shocks to the system the exogenous shocks considered by the paper include permanent transitory and anticipated changes in an income tax and an investment subsidy as well as changes in the level of government purchases of traded and non traded output

the impact of development on women a specific factors analysis abstract the specific factors model is employed in this paper as a means of explaining how economic development may serve to diminish women s welfare three changes associated with the development process are analyzed for their effect on women s real and relative wage 1 an expansion of trade induced by an improvement in the terms of trade 2 technological change and 3 an increase in female labor force participation

the rybczynski theorem in the three factor two good model abstract this paper proves that if each factor is normal in the three factor two good model the expansion of a factor endowment always increases at constant commodity prices the output of the commodity which uses the expending factor most intensively

the shadow price of foreign exchange with minimum wages abstract this note derives the shadow price of foreign exchange in a small open economy with minimum wage unemployment under tariffs quotas and voluntary export restraints the analysis is conducted in a dual general equilibrium framework with many goods and factors

income inequality and international migration the purpose of this paper is to analyse the impact of international factor movements on the personal distribution of income in order to get clearcut results we use a simple model of trade and migration in which there are two traded goods and three factors for any given country one of the traded goods corresponds to exports and the other to imports the three factors include capital and two types of labour skilled and unskilled we focus mainly on the alternative results of international migration of the two types of labour the geographical focus is worldwide excerpt

heterogeneity in the impact of economic cycles and the great recession effects within and across the income distribution abstract in this paper we examine the effects of economic cycles on low to moderate income families we use variation across states and over time to estimate the effects of cycles on the distribution of income using fine gradations of the household income to poverty ratio we also explore how the effects of cycles affect the risk of falling into poverty across demographic groups focusing on age race ethnicity and family type we conclude by testing to see whether these relationships have changed in the great recession we discuss the results in light of the changes in the social safety net in recent decades

import restrictions capital taxes and welfare this paper develops a two good small country general equilibrium model with trade restrictions i e a tariff an import quota or a voluntary export restraint ver inter national capital mobility and taxes on the rate of return to capital within this context it examines the price and welfare effects of capital taxes the second best policy towards capital in the presence of such trade restrictions and the welfare implications of trade liberalization in the presence of capital taxes the analysis demonstrates among other things that i the optimal policy towards capital is a zero tax when imports are quota constrained and is a tax under a tariff and a subsidy under a ver when the imported good is capital intensive and that ii an asymmetry exists between trade and capital movements liberalization under the various trade regimes

resource rights and markets in a general equilibrium model of production rights to a free resource lead to distributional deadweight losses in partial equilibrium the present paper examines related distortions in a general equilibrium model of production with output prices constant for the small open economy the free resource can result in lower output than a market with weak substitution in the other sector the free resource also leads to a convex production frontier implying a price increase lowers output in the sector regarding policy an import tariff export subsidy or price support would lower sector output these general equilibrium distortions increase the incentives to favor resource markets over rights

international labor flows and national wages when income levels of some group in the economy fall behind those of others the blame frequently is cast on the nature of international trading relationships such has been the case recently in the united states with the struggle to maintain real wages for relatively lessskilled workers much of the debate has asked how changes in world prices or in technology at home or abroad have altered wage rates see e g susan collins 1996 jones and engerman 1996 in this note we focus on another potential culprit immigration and probe more widely into past historical experience in the united states and other countries when inflows of labor from abroad disturb wage rates for nationals such international labor flows could serve to enhance rather than to depress the earnings of the country s own laborers if the question addressed concerns the effects of immigration on the welfare of the original inhabitants of a country a disarmingly simple answer was provided some years ago by harry johnson 1967 as long as immigrants bring an accumulated bundle of labor and physical or human capital that is different from that possessed by local residents the latter must gain from immigration this is the basic gains from trade argument appropriate only if the country originally did not engage in any other form of trade and if all residents held balanced portfolios of capital and labor as well it ignores the social costs incurred and extra taxes collected when migrants flow into a country in this note we focus not on aggregate welfare effects but on the effect of immigration on the return to some homogeneous national group of laborers this question is the one that most sharply divides the views of labor economists from those of trade economists on the one hand increases in the supply of labor would seem naturally to depress the return to labor but in the basic heckscher ohlin trade model with two factors and two produced commodities an inflow of labor can be absorbed with absolutely no change in wage rates as long as the terms of trade remain undisturbed we begin by asking what some basic theoretical models tell us about this issue before turning to the historical record simple theory reveals that there are two basic attributes of immigration that affect income distribution relatively how substitutable immigrant labor is for the national labor force and the occupations in which immigrants are allowed to work

factor intensities and factor substitution in general equilibrium abstract this article examines how factor intensity rankings between industries and the economy wide asymmetry in the degree of factor substitution combine to influence the manner in which changes in relative commodity prices affect the factoral distribution of income the reciprocal influence of factor endowment changes on the composition of outputs is also discussed the analysis is undertaken in a general three factor two commodity framework the minimal sized model that allows both influences to affect factor prices and admits of the possibility of complementarity between factors factors which are good substitutes find their returns behave somewhat similarly when commodity prices change while factors which are complements experience strongly asymmetrical fortunes a crucial role is played by a comparison of the share of the middle factor in each sector

can public sector employment spur human capital acquisition abstract in a general equilibrium model of a product and an education sector we add government employment of educated labor for public goods provision and for political economy reasons education subsidy may cause fewer public goods and retard the product sector

who suffers during recessions in this paper we examine how business cycles affect labor market outcomes in the united states we conduct a detailed analysis of how cycles affect outcomes differentially across persons of differing age education race and gender and we compare the cyclical sensitivity during the great recession to that in the early 1980s recession we present raw tabulations and estimate a state panel data model that leverages variation across u s states in the timing and severity of business cycles we find that the impacts of the great recession are not uniform across demographic groups and have been felt most strongly for men black and hispanic workers youth and low education workers these dramatic differences in the cyclicality across demographic groups are remarkably stable across three decades of time and throughout recessionary periods and expansionary periods for the 2007 recession these differences are largely explained by differences in exposure to cycles across industry occupation employment

capital markets urban unemployment and land abstract this paper shows that the remarkable result by khan and naqvi that a reduction in the capital rental differential always improves welfare despite the presence of a rigid urban wage can be obtained only for the 2 2 harris todaro model in an extended harris todaro framework incorporating a third specific factor a decrease in a distortion may not necessarily be welfare improving

a synthesis of the heckscher ohlin and the neoclassical models of international trade a comment abstract batra and casas 1976 have asserted that in the two sector three factor neoclassical model an increase in the supply of one factor at constant commodity prices will increase the output of the commodity using the expanding factor relatively intensively and thereby reduce the output of the other commodity the present note points out that there is a case against their assertion

the missing link the ricardian approach to the factor endowments theory of trade this paper views all interpersonal trade as ricardian while all international trade reflects each country s factor endowment the model provides the logical link betwe en heckscher ohlin and ricardo the strength of the model is that it allows simpler and more robust theorems about trade welfare and fac tor payments factor price equalization holds universally and stolper samuelson is not tied to the number of goods or factors a key resul t is that the old mill theorem that the small country gains all from trade is incorrect trade patterns with three factors and two goods a re completely characterized copyright 1988 by american economic association

free trade and income redistribution in a three factor model of the u s economy the move toward free trade promises to alter the distribution of income in the u s labor groups generally do not favor the move toward free trade which can be characterized by the continuing decline in the price of manufactured goods relative to business services the present study predicts that unskilled labor in the u s will lose under a program of free trade using a general equilibrium model of production factor shares industry shares and estimates of substitution for skilled labor unskilled labor and capital are used to examine comparative statics the interplay of factor intensity and factor substitution in the three factor production structure has proven a considerable analytical challenge building on the textbook production model with two factors the third productive factor allows technical complementarity and creates a more complex pattern of factor intensity both factor intensity and factor substitution affect the qualitative nature of the comparative statics little is known about the model s quantitative properties a 3 x 3 model with outputs of the three major sectors agriculture manufacturing services is specified and a 3 x 2 model without agriculture is also examined factor substitution is estimated with production function across states skilled labor separated by various census categories cannot be aggregated with unskilled labor in any sector and constant returns to scale cannot be rejected as a null hypothesis additionally the three inputs capital labor skilled labor are all technical substitutes comparative static results follow a pattern suggested by factor intensity changing prices of goods generally have elastic effects on factor prices stolper samuelson results in other words have a quantitative weight price changes due to a program of free trade will significantly affect income distribution similarly rybczynski type results are quantitatively significant in that factor endowment changes have elastic effects on outputs the implication is that output patterns will differ significantly across freely trading partners elasticities of factor prices with respect to endowment changes on the other hand are very inelastic this inelasticity suggests that there would only be small long run effects of international migration capital flows or endowment differences on the international pattern of factor income this inelasticity is called near factor price equalization nfpe under nfpe freely trading countries will experience a vector of factor prices nearly equal to each other nfpe suggests that the qualitative effects of changing or different factor endowments

an energy factor proportions model of the us economy abstract a factor proportions model examines the effects of falling energy input and its rising price in the us economy based on a novel production function motivated by the definition of physical work this physical production function specifies separate interaction of energy and labor with capital estimated with annual data from 1951 to 2008 energy has a large output elasticity and inelastic own input demand a rising energy price lowers the return to capital in the general equilibrium even though capital is a moderate substitute for energy energy has robust comparative static elasticities linked to manufacturing in the general equilibrium

stability of the mobile capital harris todaro model some further results a necessary and sufficient condition for stability is derived for the mobile capital harris todaro model of rural to urban migration in developing countries when land is a scarce factor in agriculture the stability condition when land is ignored that the urban sector comprising manufacturing industry and the urban unemployed be more capital abundant is no longer either necessary or sufficient for stability nevertheless this condition always enhances stability and it is sufficient though not necessary for stability in many circumstances e g when land is separable in production from labour and capital intuitive explanations of these conditions are provided excerpt

trade and factor prices in a model of capital utilization in recent years there has been considerable work on the economics of capital utilization but the implications of endogenous capital utilization for trade and comparative advantage have not been worked out empirical research has revealed that there is a great deal of variation across countries in the willingness of employees to work during evening and night hours and on weekends and the partial equlibrium theory of optimal capital utilization shows that a willingness on the part of employees to work during abnormal hours can reduce the cost of production frequently by reducing the need for fixed capital the effects on production costs will depend of course on the wage premium demanded by workers for abnormal hours work it stands to reason therefore that recognition of the varying degrees of willingness of employees to work during abnormal hours will have important implications for comparative advantage and trade this paper will be concerned with the introduction of endogenous capital utilization into one of the sectors of the standard two factor two sector model of trade there are two fundamentally different ways in which this introduction can take place in the first approach as each firm increases its level of capital utilization it in effect imposes abnormal hours of work on its existing labor force and it must increase the wage premium for labor during abnormal hours in this model the firm s optimal level of capital utilization occurs where the increased wage premium from the increase in abnormal hours work balances the saving of capital costs from the increase in capital utilization in the second approach the firm regards as given the wage rates for normal hours and for abnormal hours work and therefore the wage premium for abnormal hours is also

a theorem on income distribution in a small open economy abstract if the number of productive factors exceeds the number of commodities produced changes in factor endowments and or any commodity price will alter factor prices in a way that depends both upon factor intensities and the degree of factor substitutability however bilateral factor intensity rankings for constant price industries by themselves restrict possible factor price changes if factors are ranked from most to least intensive in any such pair of industries all the gainers cannot be located at one end of the ranking

international factor movements and the ramaswami argument in a succinct but classic article appearing in economica in 1968 ramaswami put forth an argument supporting the superiority of a policy that attracts foreign factors over a policy that allows a relatively abundant factor to emigrate in each case the active home country is assumed to levy taxes on factor flows so as to capture for itself the discrepancy in return to the same factor at home and abroad the asymmetry reflected by this policy ranking rests on a basic propeity of production functions the convexity of technology plus the ability of the active home country to hire or rent out factors at wages or rentals prevailing in the foreign country briefly put the ramaswami argument proceeds as follows suppose the active home country is capital abundant and has levied on optimal tax on earnings of its own capital operating abroad now consider repatriating this capital and allowing for the first time some inflow of foreign labour in particular suppose the home country allows a level of immigration identical to the labour force previously employed with the home capital that is being repatriated such a transfer of home capital and foreign labour out of the foreign country leaves factor proportions abroad undisturbed and thus does not alter the wage that must be paid to attract the requisite bundle of foreign workers although the home country thus avoids any increase in factor costs in foreign markets it can increase output since the capital labour ratiooriginally employed at home at high home wage rates is greater than the ratio in the freshly acquired bundle from abroad by adopting a uniform capital labour ratio over all factors now employed at home output and thus real income rises there may be even further gains to be had by allowing yet a different optimal level of immigration in the home country which has now banned capital exports 2 essential to the ramaswami argument is the ability of the home country to extract a bundle of factors previously employed abroad without disturbing factor prices in that country indeed jones coelho and easton 1983 have suggested that in the context of the ramaswami discussion the original argument could be pursued to suggest that the home country gains not only from repatriating its own capital but from actually encouraging foreign capital to be employed at home such a capital flow is admittedly uphill the home country would have to pay out more in rentals than such capital can earn at home despite this fact such an import of capital and labour in the same proportions found abroad does not alter foreign factor prices but does via the same ramaswami type argument on the convexity of the technology result in gains at home although ramaswami s own discussion starts with a repatriation of home capital previously invested abroad his argument can be applied directly to the foreign autarky factor endowment bundle if technology exhibits constant returns to scale and if all both factors are indeed internationally

agricultural supply response in the argentinean economy este trabajo tiene como objetivo estimar la forma reducida de una funcion de oferta agropecuaria de la economia argentina en el marco de un modelo de equilibrio general los resultados de la estimacion de la oferta agropecuaria con datos que cubren los anos 1939 1984 muestran que hay una elasticidad precio de oferta de largo plazo de aproximadamente 1 3 que es estadisticamente significativa y que la convergencia al estado estacionario se logra en aproximadamente nueve anos esta estimacion de la elasticidad de oferta agropecuaria es aproximadamente tres veces mas grande que estimaciones previas con modelos de equilibrio parcial

free trade and factor price polarization abstract factor price equalization between trading partners is perhaps the best known implication of the heckscher ohlin samuelson model of production and trade it has long been known that with more primary factors than goods this result is not necessary recent studies have investigated effects of changing prices on factor payments in the three factor two good trade model this short note emphasizes that when such an economy moves from autarky to free trade payment to a relatively cheap factor may fall polarizing factor prices conditions favoring this outcome are examined

poverty in america trends and explanations despite robust growth in real gdp per capita in the last three decades u s poverty rates have changed very little we summarize some basic facts about poverty in the united states relying on a combination of previously published data from the census bureau and our own tabulations based on current population survey data we then discuss and evaluate four determinants of changes in the poverty rate that have been advanced in the literature the impact of labor market opportunities the role of changes in family structure the role played by government antipoverty programs and the role of immigration

factor movements with three factors and two goods in the u s economy abstract ruffin s 1981 theoretical finding that extreme factors must be enemies and the middle factor must be a friend of both extreme factors with constant product prices in a three factor two good general equilibrium model is confirmed empirically for the united states results are used to explain the positions factor owners take on issues of factor movement policies

factor mobility trade and welfare abstract the paper develops a north south model which is driven by scale economies in the modern sector the model predicts that skilled and unskilled labor migrate from south to north and capital migrates from north to south migration of skilled labor and capital exhibits complementarity with trade while migration of labor may exhibit complementarity or substitutability if the terms of trade effects are ignored small movements of all factors affect the welfare of the population in south negatively and of that in north positively the effects of migration on the terms of trade are ambiguous in general

industrial shut downs and medium run factor intensity reversals while short run factor intensity reversals lead to industrial shut downs when there are two productive factors this paper shows that an industry can undo an intensity reversal over the medium run and avoid shutting down when there are three or more factors medium run adjustment begins with a capital fixed input and extends until it has become perfectly mobile j peter neary 1978 develops a picture of adjustment with two industries and two inputs where an industry must shut down following an intensity reversal the present study adds a third input skilled labor or natural resources to capital and labor

do tariffs protect specific factors it is shown that a tariff can lower payment to a productive factor used only in specific to the protected industry in a simple production model this may occur anytime the protected sector shares more than one common factor with the rest of the economy as seems most likely intuition based on the well known specific factors model where sectors share a single common factor should be modified whether specific factors effectively receive protection from tariffs becomes an empirical issue

welfare effects of migration in societies with indirect taxes income transfers and public good provision abstract we construct a general equilibrium trade model of a two class small open host or source country when consumption tax revenue finances the provision of a public good marginal migration reduces social welfare in the source country and raises it in the host when consumption tax revenue is equally distributed among domestic households in each country then migration has an ambiguous impact on social welfare in either country when tariff revenue in either country is either equally distributed among domestic households or it is used to finance the provision of a public good then migration has an ambiguous effect on social welfare in the host country and is expected to reduce social welfare in the source

accumulation of human capital in ldcs in the presence of unemployment this paper takes up an aggregative growth framework to study how human and physical capital evolve over time as households allocate their investment between the two assets in the context of unemployment of educated labor it develops a general equilibrium model of an economy with two sectors a composite good sector and a schooling sector where output is subject to increasing returns to scale a temporary equilibrium for this economy depends on the endowments of physical and human capital as well as on the output elasticity of returns to scale and the price elasticity of education the dynamic evolution of this economy is explored in terms of the accumulation of the two types of capital a rise in education subsidy increases the demand for education at the cost of investment in physical capital and could lead to inefficient substitution between skilled and unskilled workers in the long run copyright 1994 by the london school of economics and political science

capital utilization and factor specificity in this study a model of firm behavior that allows the level of capital utilization to be optimally chosen by cost minimizing firms is embedded into the standard specific factors model employed in the international trade literature the resulting generalization of the specific factors model provides several new insights for instance allowing for variable utilization in either or both sectors gives rise to a greater variety of possible trade patterns than forcing utilization to remain constant similarly international differences in the willingness to work during abnormal hours generate a wider variety of trade patterns than are possible in the standard specific factors model finally this model allows a reconciliation of the dual scarcity explanation of the nineteenth century anglo american pattern of trade with the historical evidence on levels of utilization