There are two main reasons why international trade has strong effects on the distribution of income:
Factors of production cannot move instantaneously and costlessly from one industry to another and Changes in an economy's output mix have differential effects on the demand for different factors of production
International trade often has strong effects on the distribution of income within countries which...?
often produces losers as well as winners
A useful model of income distribution effects of international trade is..?
the specific-factors model
In the Specific factors model, differences in resources can cause...?
countries to have different relative supply curves, and thus cause international trade
in the specific-factors model, factors specific to export sectors in each country...?
gain from trade
in the specific-factors model, factors specific to import-competing sectors...?
lose from trade
Mobile factors that can...?
work in either sector may either gain or lose
Trade nonetheless produces overall gains in the sense that those who gain...?
could in principle compensate those who lose while still remaining better off than before.