Consider a Specificc Factors model with two tradable sectors: manufac-

tures and services. There are three factors of production: workers with college

degrees, workers with associates degrees or high school diplomas, and manual

laborers with no education. Write an essay to build the case for how such a

model can explain why trade may be responsible for the rising college wage

premium (the ratio of the wages of college-educated workers to the wages of

high school workers) in the medium-run, and evaluate the extent to which

this hypothesis is a good explaination of the world.

Q. set up the model in a way that will guarantee college educated

workers gain from trade and high school educated workers lose from trade

when the US exports services and imports manufactures. Show how trade

impacts the economy (all quantities and prices, including factor rewards) un-

der these circumstances