Let's now consider specific factors models of international trade.
These models start with a basic point that not all factors of production are mobile.
So, for instance, imagine that you have a piece of land,
you're growing grass on that land to feed the horses.
Maybe you cannot easily take the same piece of land
and build an automobile factory geared for export on it.
Another example of a partially immobile factor were
autoworkers in Detroit in the United States in the 1980s.
As Japanese-made automobiles became more popular in the United States,
many of these Detroit auto workers were worse off.
Some of the more mobile ones may have moved to Texas
and taken jobs in the energy sector, but the less mobile ones,
the ones perhaps who were tied to the area because of their families,
they now faced lower wages or perhaps lost their jobs altogether.
A core lesson of the models is that
the more mobile factors of production didn't suffer nearly as much.
Let's say that you owned some corporate jets and you used to rent out those
corporate jets to executives of Ford or General Motors in Detroit.
When the auto sector in Detroit contracted,
yes the demand for your jets went down
but there were many other things you could do with the jets
and basically, you would fly your jets to some other part of the country
and rent them out to some other set of executives.
And the value of your jets, which are mobile, wouldn't go down very much at all.
Now that was a case of rising imports
but let's say you have a sector where exports go up and we then want to ask:
Who benefits from that?
We will again turn to specific factors models.
Just as the owners of the fixed or immobile factors
can lose when things go badly, it's also the owners of the fixed factor
who gain when things go very well.
Pictured here is a place in France where grapes are grown
of course to be made into wine for export.
If the demand for French wine goes up,
which factors of production benefit?
To the extent land is a fixed factor,
there are only so many good lands for wine
with the right climate and the right kind of grapes.
The French owners of those lands will be those who benefit.
You might wonder: what about the French workers?
Say the demand for grapes goes up because the demand for French wine has gone up.
Are the French workers who pick the grapes going to be much better off?
This again depends upon mobility.
If there's mobility of other French workers into the grape picking sector
and the increase in wages will bring in more workers
and then the wage will go back down again.
But if you imagine there's not much worker mobility
into the grape picking sector for whatever reason
then you will find that French workers to some extent will also be better off.
As I'm making this video in 2013 in the United States in recent years
there has been a boom in the value of Indiana farmland.
This is in part because the demand for soy has gone up
and the relatively immobile factor here is the land.
Just to repeat the key lesson here,
it's that changes in trade fall mainly upon the fixed factors of production.
A secondary policy implication is that
if a government wishes to protect its workers against, say, an increase in
imports, what it can do is make labor markets more flexible and make it easier
for those workers to be mobile into other regions or other occupations.
For further reading, including some graphical presentations,
what you can do is simply Google "specific factors model."
We also recommend the textbook by Feenstra and Taylor and their chapter
on this topic in their book, "International Trade."