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A Factor Augmentation Formulation of the Value of International Trade

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  • Daniel Bernhofen
  • John Brown

Abstract

We develop a two-country, two-sector model with a continuum of workers to address the link between migration and trade where policy is determined by a simple referendum. In particular, we address two questions. First, are states already in free trade areas more likely to support full integration than states without free trade? Second, is trade liberalization more likely to be supported by a simultaneous referendum on trade and migration than in one on trade alone? The key to our analysis is the recognition that for free trade, migration, or trade and migration to be adopted, the relevant policy must pass the referendum in both countries. We identify conditions under which that occurs. Our model provides an interpretation of the evolution of the politics of economic integration related to NAFTA and European Union.

Suggested Citation

  • Daniel Bernhofen & John Brown, 2012. "A Factor Augmentation Formulation of the Value of International Trade," Discussion Papers 12/05, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:12/05
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    References listed on IDEAS

    as
    1. Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
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    3. Allen, Robert C. & Bengtsson, Tommy & Dribe, Martin (ed.), 2005. "Living Standards in the Past: New Perspectives on Well-Being in Asia and Europe," OUP Catalogue, Oxford University Press, number 9780199280681.
    4. Keith E. Maskus, 1991. "Comparing International Trade Data and Product and National Characteristics Data for the Analysis of Trade Models," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 17-60, National Bureau of Economic Research, Inc.
    5. Osamu Saito & Tokihiko Settsu, 2006. "Money, credit and Smithian growth in Tokugawa Japan," Hi-Stat Discussion Paper Series d05-139, Institute of Economic Research, Hitotsubashi University.
    6. Daniel M. Bernhofen & John C. Brown, 2005. "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan," American Economic Review, American Economic Association, vol. 95(1), pages 208-225, March.
    7. Peter Hooper & J. David Richardson, 1991. "International Economic Transactions: Issues in Measurement and Empirical Research," NBER Books, National Bureau of Economic Research, Inc, number hoop91-1, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    gains from trade; factor augmentation equivalent to trade; natural experiment of Japan;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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