Assume that a democratic country uses two production factors, labor, and land, to produce two goods, land-intensive agricultural goods, and labor-intensive manufacturing goods. Both production factors can freely choose in which industry they work. The country does not engage in trade with any other country, as international trade is forbidden by law. The parliament of the country is now considering whether it should adopt a bill that will remove the ban on international trade.

The parliament has 100 members. Any law is adopted if the majority of its members vote in favor of it. The members of parliament can be affiliated with one of the following four political parties: The Agricultural Workers’ Union (AWU), the United Front of Manufacturing Workers (UFMW), the Party of Land Owners in the Manufacturing Industry (PLOMI), and the Farm Land Owners’ Party (FLOP). The four political parties represent the production factors in the respective industries. For simplicity, let us assume that every member of parliament only cares about their own constituency and wants to maximize the real wage or real return for their respective constituency.

If workers cannot easily leave their industry as one needs a specialized degree to be allowed to work in an industry:

(a)Assume that the country is relatively land-abundant compared to the rest of the world. Which parties will vote in favor of opening up to trade? Or against? Explain.

(b)Now assume that the country is relatively labor-abundant compared to the rest of the world. Which parties will vote in favor of opening up to trade? Or against? Explain.