Question
Suppose that there are two countries in the world, home country (H) and foreign country (F). There are two goods, computers (C) and shoes (S),
Suppose that there are two countries in the world, home country (H) and foreign country (F). There are two goods, computers (C) and shoes (S), and the only factor of production is labor (L). H has comparative advantage in C, and tow countries are now in free trade. H only produces C while F only produces S.
Now suppose that countries are concerned about jobs loss in the industry in which they have a comparative disadvantage. Therefore, they both passed a new law stating that half of each country's labor force must be used in each industry. In other words, half of home's labor must be used in producing computers and the other half must be used in producing shoes.The same is true for the foreign country
Do you support this policy against a free trade policy where employment structure is determined by comparative advantages?
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