Microeconomic Analysis Automobile Industry. Eassy:show Favoritism Trade Essay

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microeconomic analysis automobile industry. Eassy:Show favoritism Trade Income Give relationship trade income distribution countries car industry. Give findings suggestions.

Project Plan -- Trade and Income

In the era of globalization, countries strive to capitalize on the opening of boundaries by operating in other regions to benefit from their comparative advantage, but also by selling their products onto various global regions in order to enhance revenues. The economic role of exports is often perceived as positive. Governments and economic agents seek to produce and export as many commodities as possible in order to enhance their competitive positions within the international market, but also to generate more profits. Through this, it is expected that the incomes of the citizens in the respective firms and countries increase.

At a wider scale nonetheless, the relationship between trade and income is more controversial. Carol Letwin (1998) for instance found that trade and exports reduce the income inequality only when the increase in trade is based on the development, training and education of the staff members. Donald R. Davis however argues that exporting countries will register an increase in the income of the blue collar workers, directly involved in manufacturing and exporting, rather than the incomes of the white collar employees.

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In other words, the income inequality within exporting countries would be reduced.

Richard Barry Freeman and Lawrence F. Katz (1995) then believe that trade will reduce income inequalities at a global level in the meaning that the gross domestic products of exporting countries would increase and the gap between their GDPs and the GDPs of the more developed states would decrease. In their perception however, the income inequality within the more developed country would decrease as the blue collar jobs would be outsourced to more cost effective regions. This means that the incomes of blue collar individuals in developed countries would diminish, increasing as such the income gap.

Overall, the relationship between trade and income distribution is a complex one and it cannot be generalized as a recurring phenomenon, but has to be analyzed in specific contexts. In the case of the United States automobile industry for instance, the export of automobiles has generated demand for the….....

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