Resources and Production Possibilities
Finally, welcome to the Rybczynski Model! In this model we combine what we know about factor endowments and factor intensities to evaluate the effects of increases and decreases of the factors of production! In the diagram below we see that an increase in endowment of a factor of production (T' to T'') causes an increase in the quantity produced of that factor intensive product (c to c'') when that relative prices are held constant. In the case of our example below, cloth is a labor intensive good, and when we increase the the endowment of labor, perhaps through immigration, we see an increase in amount of cloth produced and a decrease in the amount of food produced, which is a land intensive good. The downward sloping Rybczynski line (in red) reflects the decrease in food production under conditions of increasing labor endowment.
The Final Rybczynski Model
This spectacular model represents Rybczynski's finest work.
Magnification Effects
Restating the Theorem: If relative goods prices are
constant (Pc/Pf), an increase in the supply of one factor causes the
output of the good that uses that factor intensively to increase more
than proportionally, and the output of the other good to fall more than
proportionally.
In
other words, in the example we've developed, at constant prices an
increase in labor causes the economy to produce more cloth and less
food.
This can be shown by:
» % change in C > % change in L
> % change in T > % change in F when there is an increase in labor.
And/or:
» % change in F > % change in T
> % change in L > % change in C when there is an increase in land.
Back to Theory page
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References
If you find this information as fascinating as we do, please register for Economics 331 for Fall 2006!
And please share your enthusiasm with Professor Mark Reiman in Xavier 114!
Rybczynski Club!
Excited about Rybczynski? Can't wait to
derive the model yourself? Join the Rybczynski club for more model fun!
First meeting December 8 at 7pm in Xavier 150! Free Econ pen to the first 5 students!
» For math lovers, please be sure to visit this site for the mathematical derivation of this model.
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