In the same apple-computer trade example given in Section 19.5, suppose that because of technology transfer, the South becomes just as productive as the North at producing apples: one unit of southern labor can now produce 160 apples instead of 100. Migrants from the South 160 apples 80 apples TABLE 19.5 Northern and Southern Workers with Free Migration Workers born in the North Wage, w 160 apples Price of a computer, p 10 apples Consumption of apples (per person) 80 apples Consumption of computers (per person) 8 computers Fraction of labor working to produce apples Fraction of labor working to produce computers Total production in the apple sector 40,000 apples Total production in the computer sector 4,000 computers 8 computers 50% 50% Autarky: Redo Table 19.3 to reflect this change. Assume the other parameter values are unchanged. TABLE 19.3 The North and the South under Autarky North South Wage, w Price of a computer, P 160 apples 10 apples 100 apples 50 apples 80 apples 50 apples Consumption of apples (per person) Consumption of computers (per person) 8 computers 1 computer 50% 50% Fraction of labor working to produce apples Fraction of labor working to produce computers 50% 50% 8,000 apples Total production in the apple sector Total production in the computer sector 20,000 apples 400 computers 800 computers Free trade: Do the same thing for Table 19.4. TABLE 19.4 The North and South with Free Trade North South 0% 100% Fraction of labor working to produce apples Fraction of labor working to produce computers 100% 0% 40,000 apples Total production in the apple sector Total production in the computer sector 0 apples 1,600 computers O computers Wage, w World price of a computer, p 400 apples 100 apples 25 apples per computer 200 apples 50 apples Consumption of apples (per person) Consumption of computers (per person) 8 computers 2 computers Discuss the differences: How do the gains from trade change? Who benefits from the improvement in technology in the South? In the same apple-computer trade example given in Section 19.5, suppose that because of technology transfer, the South becomes just as productive as the North at producing apples: one unit of southern labor can now produce 160 apples instead of 100. Migrants from the South 160 apples 80 apples TABLE 19.5 Northern and Southern Workers with Free Migration Workers born in the North Wage, w 160 apples Price of a computer, p 10 apples Consumption of apples (per person) 80 apples Consumption of computers (per person) 8 computers Fraction of labor working to produce apples Fraction of labor working to produce computers Total production in the apple sector 40,000 apples Total production in the computer sector 4,000 computers 8 computers 50% 50% Autarky: Redo Table 19.3 to reflect this change. Assume the other parameter values are unchanged. TABLE 19.3 The North and the South under Autarky North South Wage, w Price of a computer, P 160 apples 10 apples 100 apples 50 apples 80 apples 50 apples Consumption of apples (per person) Consumption of computers (per person) 8 computers 1 computer 50% 50% Fraction of labor working to produce apples Fraction of labor working to produce computers 50% 50% 8,000 apples Total production in the apple sector Total production in the computer sector 20,000 apples 400 computers 800 computers Free trade: Do the same thing for Table 19.4. TABLE 19.4 The North and South with Free Trade North South 0% 100% Fraction of labor working to produce apples Fraction of labor working to produce computers 100% 0% 40,000 apples Total production in the apple sector Total production in the computer sector 0 apples 1,600 computers O computers Wage, w World price of a computer, p 400 apples 100 apples 25 apples per computer 200 apples 50 apples Consumption of apples (per person) Consumption of computers (per person) 8 computers 2 computers Discuss the differences: How do the gains from trade change? Who benefits from the improvement in technology in the South
