Working Paper: NBER ID: w0999
Authors: Lars E. O. Svensson
Abstract: Previous work by Dixit and Woodland on the effect of inter-country factor endowment differences on goods trade is extended to include simultaneous factor trade and goods trade. The goods trade pattern with factor trade is compared to that without factor trade. It is for instance shown that goods trade and factor trade may be substitutes or complements, depending upon whether traded and nontraded factors are "cooperative" or "non-cooperative." The asymmetry between the effects of differences in endowments of traded and differences in endowments of nontraded factors is emphasized.
Keywords: factor trade; goods trade; international trade; Heckscher-Ohlin theorem
JEL Codes: F11; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in factor endowments in the home country (F29) | Different equilibrium in trade patterns (F12) |
| Different equilibrium in trade patterns (F12) | Nonzero trade in both goods and factors (F16) |
| Factor trade may substitute or complement goods trade (F10) | Depending on whether capital and labor are cooperative or noncooperative (P11) |
| Changes in endowments of traded versus nontraded factors (F16) | Trade outcomes (F14) |