Suppose that we have data on wages for workers in hundreds of Brazilian industries at two dates. We also have data on each industry's import tariff at each date. Suppose that tariffs change between the two dates for a number of industries, and this is the only exogenous change in the economy during those two dates. We plot the data on a scatterplot, with the change in industry tariff on the horizontal axis and the change in industry wage on the vertical axis. (In other words, each dot of the scatterplot shows, for one Brazilian industry, the change in tariff and the change in average industry wage.)
(a) Suppose that the Brazilian economy is a pure specific-factors economy, such as the one in Section 5.2. What will the scatterplot look like? Sketch an example and describe its key features in words, explaining the economic reasoning.
(b) Now, suppose the Brazilian economy is a mixed specific-factors, or Ricardo-Viner, model, such as the one in Section 5.5. Answer the same question, explaining the reason for any differences from the answers in part (a).