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Technology, Trade and Factor Mobility

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  • Douglas D. Purvis

    (Queen's University and University of Chicago)

Abstract

The well-known factor price equalization theorem is often invoked to provide trade theorists with justification for the conventional assumption of complete international immobility of factors of production. If conditions of the theorem are satisfied, and free trade does in fact give rise to the equalization of factor returns, then it is inconsequential in which country production takes place. Mundell's original analysis then brings us full circle to the "commodity price equalization theorem". If the conditions of the factor price equalization theorem are met, but a tariff on trade is imposed, then factor mobility can replace trade in establishing productive efficiency. Recent work by Jones and Kemp have analysed further the implications of introducing factor mobility and in particular capital mobility into the analysis of international trade. However, these have concentrated on generating optimum tariff and tax( on capital services) formulae for the individual country trying to maximize its own welfare. The present paper is more in the tradition of the Mundell analysis in that we are more concerned with world efficiency in production--that is, in maximizing potential world welfare.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_54.pdf
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 54.

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Length: 14 pages
Date of creation: May 1971
Date of revision:
Handle: RePEc:qed:wpaper:54

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Cited by:
  1. Linda S. Goldberg & Michael W. Klein, 1999. "International Trade and Factor Mobility: An Empirical Investigation," NBER Working Papers 7196, National Bureau of Economic Research, Inc.
  2. Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
  3. Fabien Candau, 2013. "Trade, FDI and Migration," International Economic Journal, Taylor & Francis Journals, vol. 27(3), pages 441-461, September.
  4. Unbreen Qayyum & Zafar Mahmood, 2013. "Inter-linkage between Foreign Direct Investment and Foreign Trade in Pakistan: Are they Complements or Substitute?," PIDE-Working Papers 2013:91, Pakistan Institute of Development Economics.
  5. Michael Carlberg, 1984. "International Factor Movements, Allocation and Prices," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 120(I), pages 31-42, March.
  6. Jonathan Eaton & Akiko Tamura, 1996. "Japanese and U.S. Exports and Investment as Conduits of Growth," NBER Chapters, in: Financial Deregulation and Integration in East Asia, NBER-EASE Volume 5, pages 51-75 National Bureau of Economic Research, Inc.
  7. Marzenna Weresa, 2001. "The Impact of Foreign Direct Investment on Poland's Trade with the European Union," Post-Communist Economies, Taylor & Francis Journals, vol. 13(1), pages 71-83.
  8. Jin Inhwan, 2008. "Is Japanese FDI a Substitute for or a Complement to Trade in Asia?," TERG Discussion Papers 236, Graduate School of Economics and Management, Tohoku University, revised Oct 2008.
  9. Katrin Springer, 2000. "Do We Have to Consider International Capital Mobility in Trade Models?," Kiel Working Papers 964, Kiel Institute for the World Economy.
  10. Rudy Rahmaddi & Masaru Ichihashi, 2012. "The impact of foreign direct investment on host country exports: Sector based evidence from Indonesian manufacturing," IDEC DP2 Series 2-10, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).

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