Capital Movement, Unemployment and Product Choice

Len-Kuo Hu

《Asia Pacific Management Review》 Volume 6 Issue 4 (2001/12) Pp. 425-446

https://doi.org/10.6126/APMR.2001.6.4.03

Parallel abstracts

The infusion of massive international capital into capital-wanting countries irons up the difference of real capital costs among countries. Labor cost becomes the dominant factor in determining a country's cost competitiveness. The countries with the lowest wage and the most abundant labor supply become the world's manufacturing resorts and cast serious threat on the employment of low-skill workers in the capital out-flowing countries. To combat the deterioration of labor demand in the relatively capital countries, this study suggests exploiting the economies of scale in those products with their per capita capital requirement matching the country's capital labor endowment ratio. Instead of diversifying into a wide variety of products as dictated by the Heckscher-Ohlin theory, the specialization in the products with their factor requirements conforming to its endowed resources can tolerate a high domestic wage and secure its labor employment. The more mobile the international capital becomes, the greater the need for the convergence of a country's product factor requirement ratio to its endowed one.

Parallel keywords

Capital Movement ； Economies of Scale ； Imperfect Competition ； Product Choice ； Unemployment ； Chamberlin-Heckscher-Ohlin Trade

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