International Trade: Openness, Inequality, and the SS Theorem

This report provides an analysis of international trade, specifically examining the relationship between openness and industrial pay inequality in Brazil and Thailand. It presents correlation analyses for both countries, revealing a negative weak correlation for Brazil and a slightly weak positive correlation for Thailand. The report then applies the Stolper-Samuelson theorem to explain these relationships, discussing how the theorem can be used in economic policy restructuring. It references relevant literature, including works by Kamar & Mishra (2008), Fujita et al. (2010), and Harrison & Hanson (2014), among others, to support its findings and conclusions regarding the impact of trade on economic outcomes. The analysis highlights the theorem's strengths and weaknesses, and its applicability in explaining the economic situations of both countries. The report concludes by emphasizing the importance of the theorem in making informed economic decisions and policy implementations.

INTERNATIONAL TRADE
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Figure 1: openness versus industrial pay for Brazil
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Openness versus industrial pay inequality for Brazil
The figure above shows the trend of openness against pay for Brazil between 1985 and 2010.
Figure 2: Openness against industrial inequality in Thailand
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Openness against industrial inequality for Thailand
Figure 2 above shows openness against industrial inequality for Thailand.

Correlation analysis of the data on openness and industrial pay inequality
The correlation coefficient for Brazil for the openness and the industrial pay inequality is -
0.03960071. This correlation coefficient implies that there is a negative weak correlation
coefficient between the openness and the pay inequality. The economic metric of Brazil for her
total trade, pose a declining industrial pay inequality which can well be explained from the
correlation coefficient as proved from the calculation.
Similarly, the correlation coefficient as calculated for the openness and industrial pay inequality
for Thailand is 0.048215974 which is a slightly weak positive correlation. This, therefore, gives
an insight that the degree of relationship between the openness and industrial pay inequality in
Thailand is somehow positively correlated. So it can be concluded that openness contributes a
positive impact on the inequality in companies in terms of payments.
Stolper Samuelson theorem and its compliance to the data
Stolper Samuelson theorem is basically applied in Heckscher-Ohlin trade. The relationship of
relative prices of output and reward factor relatively. Precisely it specifies on real returns and
real wages to capital invested in an economic setting. This theorem brings into light that under
some specified assumptions in economic discipline, inclusive of perfect competition, constant
return to scale, equality of the number of products to the number of products among others,
relative price of a good rise would trigger a prompt rise will lead to a direct rise in the factor and
the other related products that are directly and intensively used in the production of the good.
Similarly, this also leads to a decreased return on other factors not used in the production.

This theorem was put in to effect in 1941 when it was derived. However, it has been used in less
restricted models. This theorem has been proven to provide various answers applied in
economics discipline. However, the theorem has been explained to apply more general features.
Additionally, the model has its strengths and weaknesses which prompted the research probe on
its robustness in order to relieve its assumptions. For instance, a highlight on central prediction
on the relaxations done by Ethier (1974), stated that tariff will always rise with many factors and
goods and on the other hand lower tariff with many goods and factors.
From the data of Brazil on openness and industrial pay inequality, we find that the recorded
openness data entry corresponding to the industrial pay inequality exhibits a relationship
whereby a rise in the openness data has an effect on the industrial pay inequality. Similarly, for
the same case applies to Thailand whereby a distinct impact of relationship is evident in the
variation of the openness data in relation to the industrial payment inequality. Further, their
correlation coefficients suggest a relationship of importance to both economies.
Stolper Samuelson theorem can be applied in the explanation of the situation of both economies.
This theorem can be used in making policies that are geared in restructuring economic situations
and most precisely be used in making important decisions for both economies.
References
Kamar, U. and Mishra, W., 2008. Trade liberalization and wage inequality: Evidence from
India. Review of Development Economics, 22(5), pp.291-311.
Fujita, M., Krugman, P.R., Venables, A.J. and Fujita, M., 2010. The spatial economy: cities,
regions and international trade (Vol. 213). Cambridge, MA: MIT press.

Harrison, A. and Hanson, G., 2014. Who gains from trade reform? Some remaining
puzzles. Journal of development Economics, 59(1), pp.125-154.
Dutta, D., Dhar, J 2010. Project report on “. Image Deconvolution By Richardson Lucy
Algorithm.
Becker, N., 2012. General and Miscellaneous-Unequal Trade: The Economics of Discriminatory
International Trade Policies.
Ferreira, 2007. Trade liberalization, employment flows, and wage inequality in Brazil.
Dosi, G., 2013. The economics of technical change and international trade. LEM Book Series.
Krugman, P.R. 2009. Strategic trade policy and the new international economics. mit Press.