ECON 219 Lecture 8: Notes

• School: McGill University
• Department: Economics
• Course: ECON 219
• Professor: Sandra Saghir

Document Summary

Low wages are associated with low productivity: compare how productivity of a country was with respect to usa? ( from textbook) The 45 degree line in the graph shows us that majority countries of the world lie close to the line. Where does it stand in terms of average productivity with respect to us productivity. Productivity is a representative of low wage. Rich countries & poor countries can both have comparative advantage. If you have low wage, you have cost advantage. In 1975, south korea"s productivity was only 5% of the united states. Indeed if you improve productivity, wages will follow. In reality even unproductive country will benefit from free trading: even if you don"t have absolute advantage you can still gain from lower combination, cheaper products through foreign import, high costs derived from inefficient use of resources. Are high wages and safe labor practices alternatives to trade: deeper poverty & exploitation may result without export production.