Income Inequality in China: Coastal vs Inland

Questions and Answers

What is one disadvantage of having cheap migrant labor according to the content?

Increased wages for domestic workers

Higher labor productivity

Lower incentive to move up the value chain (correct)

Increased innovation among firms

The influx of foreign workers has no impact on domestic workers’ income.

False

What is one advantage of skilled migrant workers in developed countries?

They help plug shortages in skills.

Increased demand for workers in coastal regions leads to higher wages and greater __________ in income between urban and rural areas.

inequality Signup and view all the answers

Match the following outcomes with their respective categories:

Brain drain in developed countries = Government/Economy Disadvantage Returning skilled workers in developing countries = Government/Economy Advantage Job opportunities increase in cities = Producers Advantage No incentive to innovate among firms = Producers Disadvantage Signup and view all the answers

What is the main argument for protecting infant industries?

To allow domestic firms to develop their comparative advantage Signup and view all the answers

Protection of infant industries guarantees that they will always become competitive.

False Signup and view all the answers

What potential benefit can domestic firms in an infant industry gain from protectionism?

Economies of scale Signup and view all the answers

The protection of infant industries may lead to a temporary net welfare loss from higher domestic __________.

prices Signup and view all the answers

Match the arguments for and against protectionism:

Argument For = Higher domestic prices lead to temporary welfare loss Argument Against = Allows firms to develop comparative advantage Advantage = Protection is removed once industries are established Disadvantage = Firms may never become competitive Signup and view all the answers

Study Notes

Income Inequality in China

Coastal cities like Shanghai, Guangzhou, and Shenzhen attract more Foreign Direct Investment (FDI) compared to inland cities.
Disparities in income levels lead to significant economic inequality between urban and rural regions.

Impact of Cheap Labor on Firms

Firms relying on low-cost migrant labor lack motivation to innovate and adopt new technologies.
This results in stagnation and a failure to move up the value chain.
Domestic producers may not improve production methods, hindering labor productivity enhancements.

Costs of Cheap Labor for Consumers

An influx of foreign workers can lead to job losses among domestic workers, resulting in decreased income.
Affected individuals experience lower standards of living due to income loss and reduced material well-being.

Advantages of International Labor Flow

Skilled migrant workers help to fill skill shortages in both developed and developing nations, enhancing resource quality and quantity.
Returning skilled workers transfer knowledge and expertise, boosting productivity in their home countries.

Disadvantages of International Labor Flow

Brain drain may occur in developed countries as skilled workers move to fill high-level positions in multinational corporations (MNCs) in developing nations.
This results in unemployment for local skilled workers in the developing countries.

Arguments for Protectionism

Protection of infant industries is justified to help them grow and establish a comparative advantage against established foreign competitors.
Without protection, domestic infant industries may struggle due to higher competition and production costs.

Arguments Against Protectionism

Protectionist measures may lead to temporary welfare losses due to higher domestic prices.
If protected industries fail to develop a comparative advantage, the economic loss can become permanent.

Globalization and International Trade

Globalization integrates economies through trade, allowing for the exchange of goods and services across borders.
Countries should specialize in goods/services they can produce more efficiently, trading for those they cannot produce as cheaply.

Comparative Advantage Example

Japan has a lower opportunity cost in producing cars (0.5 units of rice) compared to Thailand (2 units of rice), giving it a comparative advantage in car production.
Conversely, Thailand incurs a lower opportunity cost in rice production (0.5 units of cars versus Japan's 2 units), allowing it to specialize effectively in rice.

Conclusion on Globalization Impacts

Globalization leads to increased trade flows and opportunities for economic growth.
Improved communication technology and relaxed migration laws contribute to rising international labor and capital flows.
Singapore reflects the dynamic effects of globalization on national economic structure and comparative advantages.

Description

This quiz explores the dynamics of income inequality between coastal cities like Shanghai, Guangzhou, and Shenzhen, and their inland counterparts. It examines the impact of foreign direct investment and the motivations of firms regarding innovation and technology adoption in different regions.