Effects of Technical Progress and Foreign Labor Importation on Shifting Comparative Advantage: A Geometrical Note

• Main Author: HOON, Hian Teck
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1986
• Subjects: Economics; Industrial Organization
• Online Access: https://ink.library.smu.edu.sg/soe_research/110; https://doi.org/10.1111/j.1813-6982.1986.tb00894.x
• Institution: Singapore Management University

A country that launches an export-oriented development strategy frequently bases its industrialization program on the export of labour-intensive manufactured goods. In the initial stage the economy is relatively abundantly endowed with labour. However, in the process of economic growth both human and physical capital accumulate, and sometimes and 'easy' labour market become tight. There occurs a shift in relative factor endowment away from labour abundance, implying a shift away from comparative advantage in labour-intensive goods. There is, therefore, an incentive for producers in labour-intensive industry to promote a policy of importing foreign labour, as well as an application of technical progress in their industries. It is the purpose of this note to analyse, using standard international trade theory, the effects of foreign labour importations and technical progress in the labour-intensive industries.