International Trade - Theory and Policy, 2010a

5.17 Dynamic Income Redistribution and Trade
LEARNING OBJECTIVE
1. Integrate the results of income redistribution from three separate models: the immobile
factor model, the specific factor (SF) model, and the Heckscher-Ohlin (H-O) model.
A number of trade models demonstrate that movements to free trade will cause a redistribution of
income. The immobile factor model concludes that income will be redistributed from workers in the
import-competing industry to workers in the export industry. The specific factor (SF) model concludes
that owners of capital in the export sector will gain at the expense of capital owners in the importcompeting
sector and that the effects on workers in both industries are ambiguous. The Heckscher-Ohlin
(H-O) model demonstrates that income will be redistributed from owners of a country’s scarce factor, who
will lose, to owners of a country’s abundant factor, who will gain.
One of the key distinctions between these models is the degree of factor mobility. The immobile factor
model represents one extreme, in which factors are stuck in one industry and cannot move between
sectors. The H-O model represents another extreme, in which factors can move freely and costlessly
between sectors. The SF model represents an intermediate special case in which one factor is completely
immobile and the other is completely mobile.
As was discussed in detail in Chapter 4 "Factor Mobility and Income Redistribution",Section 4.2 "Domestic
Factor Mobility", different factors of production will likely have different degrees of mobility. Some factors
are easily adaptable to other industries. For example, accountants are needed in all businesses, and trucks
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