Problem
1. How is it possible that reciprocal dumping can be beneficial for aggregate welfare if identical commodities are moving between countries and transportation costs are being incurred?
2. In the late 1970s, a large part of athletic shoe production shifted from plants in the United States to plants in South Korea. In late 1993, it was reported that South Korean shoe firms had suffered a large reduction in jobs and sales because, due to rising wages, shoe production had shifted to Indonesia and China. (See Steve Glain, "Korea Is Overthrown as Sneaker Champ," The Wall Street Journal, October 7, 1993, p. A14.) How might these moves in product location fit the product cycle theory? Could HeckscherOhlin also be of value in explaining these developments? Why or why not?