Factor Mobility And Earnings Redistribution

Information applied sciences additionally enable the operation of subsidiaries to be controlled from distant headquarters. Different components of the production course of can then be situated worldwide, wherever labor prices, environmental regulations, and agglomeration economies are greatest suited to that activity, creating commodity chains of worldwide scope. The assumption of labor immobility permits us to assess the short-run impression of actions to free commerce where the brief run is outlined because the time frame when all components of production are incapable of transferring between sectors. The primary result of the mannequin is that free commerce will trigger a redistribution of revenue such that some employees gain from trade, whereas others lose from trade. This chapter asks, “What occurs if free and costless issue mobility does not hold?

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