Problem
As a result of the North American Free Trade Agreement (NAFTA) in 1994, the United States and Canada shifted toward free trade with Mexico. Note: according to the data about factor endowments in class, the US and Canada are relatively abundant in skilled labor and relatively scarce in unskilled labor. Mexico is the opposite: abundant in unskilled labor and scarce in skilled labor.
1. According to the Stolper-Samuelson Theorem, how is this shift affecting real wages of unskilled labor in Mexico?
2. According to the Stolper-Samuelson Theorem, how is this shift affecting real wages of unskilled labor in the United States and Canada?
3. According to the Stolper-Samuelson Theorem, how is this shift affecting real wages of skilled labor in Mexico?
4. According to the Stolper-Samuelson Theorem, how is this shift affecting real wages of skilled labor in the United States and Canada?
5. Use the Stolper-Samuelson Theorem to explain the problems that Mexican farmers experienced according to the story "Mexican Forces Push Back on Zapatista Rebels" on Canvas, the transcript of which is listed with the homework.