The Specific Factors Model for Trade and Migration
When proposing new or modified economic policies, it is important to understand the distributional implications of such policies. Do they potentially affect everyone in the same way? Or can we expect different impacts for different segments of the population? The specific factors model is a canonical model that is very well suited to address distributional questions related to a range of economic policies, as it distinguishes multiple sectors in the economy that each employ a different mix of production factors (such as labor and capital). This technical note focuses on applications of the specific factors model to international trade policies; toward the end it also explores how the model might be useful in other settings. At Darden, this note is used in the second-year International Trade elective; a variant of the same model is taught in the Global Economics of Water elective. It would also be suitable in courses covering short-, medium-, and long-run analyses of economic policy.