Consider the case of Thailand, a small open economy that faces constant goods prices (takes the world prices as given and has no impact on it.)

Assume that there are two sectors, manufacturing and farming. There are three productive factors. Labor is employed in both sectors and is freely mobile between them. Capital is used only in manufacturing and land only in farming. After the recent floods a relevant part of arable land has been destroyed:

Discuss the effects on wages and the incomes of capital and land owners.