ood is free and competitive, new investment will occur only in the poorer economy, and this will continue to be true until capital-labor ratios, and hence wages and capital returns, are equalized. Within the set-up of Lucas' statement – output produced by capital and labor with constant returns to scale and the same technology being accessible to all countries – how can models of international trade explain why capital flows do not occur the way Lucas argues they should?
ood is free and competitive, new investment will occur only in the poorer economy, and this will continue to be true until capital-labor ratios, and hence wages and capital returns, are equalized. Within the set-up of Lucas' statement – output produced by capital and labor with constant returns to scale and the same technology being accessible to all countries – how can models of international trade explain why capital flows do not occur the way Lucas argues they should?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter15: International Trade And Finance
Section: Chapter Questions
Problem 6SQ
Related questions
Question
In Lucas paradox, that if trade in capital good is free and competitive, new investment will occur only in the poorer economy, and this will continue to be true until capital-labor ratios, and hence wages and capital returns, are equalized.
Within the set-up of Lucas' statement – output produced by capital and labor with constant returns to scale and the same technology being accessible to all countries – how can models of international trade explain why capital flows do not occur the way Lucas argues they should?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning