Working Paper: NBER ID: w1115
Authors: Wilfred J. Ethier; Lars E. O. Svensson
Abstract: This paper addresses the relation between goods trade and international factor mobility in general terms. Conditions for factor price equalization are derived for situations with tradein both goods and factors,as well as Rybczynski and Stolper-Sarnuel Sofl theorems. A weak price versionof the Heckscher-Ohlifl theorem is presented, as well as stronger quantity versions.The basic theorems of international trade, suitably interpreted,are shown to hold in their strong versions ifthe number of international markets is at least as large as the number of factors.The crucial dimensionality issue is hence not the relative number of goods and factors per se, but the number of international markets relative to the number of factors. Only the price version of the Heckscher-Ohlifl theorem fails to be essentially preserved by this condition.
Keywords: international trade; factor mobility; factor price equalization; Heckscher-Ohlin theorem
JEL Codes: F11; F15; F21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| number of international markets (G15) | factor price equalization conditions preserved (F16) |
| goods outnumber factors (P23) | traditional results (C52) |
| factors outnumber goods (P23) | traditional results (C52) |
| factor mobility (J62) | significance of propositions in factor endowments trade theory (F11) |