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Trade Policy and Factor Prices: An Empirical Strategy

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Author Info
Daniel Ortega () (Center for Finance, Instituto de Estudios Superiores de Administración)
Francisco Rodríguez () (Economics Department, Wesleyan University)

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Abstract

This paper presents a new empirical strategy for estimating the effects of trade policy on domestic factor prices when policy endogeneity is suspected. Absent income effectson factor supplies or domestic prices, the coefficient on the terms of trade can provide an unbiased estimator of the effect of trade barriers on the factor distribution of income for a small economy. In the more general case where income effects are allowed for, we provide a means to quantify and control for the possible bias. We implement our strategy on a cross-national data set of trade policies and income shares of capital and labor. We find little evidence of the existence of Stolper-Samuelson effects, both for the sample as a whole as well as within cones of diversification. Consistent with a model of wage bargaining, we find that the effect of openness on capital shares is greater for countries with higher unionization rates.

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Publisher Info
Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2005-004.

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Length: 38 pages
Date of creation: Apr 2005
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Handle: RePEc:wes:weswpa:2005-004

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Related research
Keywords: Factor prices trade policy Stolper-Samuelson theorem wage bargaining

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Steven D. Levitt & Jack Porter, 2001. "How Dangerous Are Drinking Drivers?," Journal of Political Economy, University of Chicago Press, vol. 109(6), pages 1198-1237, December. [Downloadable!] (restricted)
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  7. Arvind Panagariya, 2003. "Trade Openness: Consequences for the Elasticity of Demand for Labor and Wage Outcomes," International Trade 0308007, EconWPA. [Downloadable!]
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  10. Douglas A. Irwin, 2000. "Ohlin Versus Stolper-Samuelson?," NBER Working Papers 7641, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April. [Downloadable!] (restricted)
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  13. Eugene Beaulieu, 2002. "Factor or Industry Cleavages in Trade Policy? An Empirical Analysis of the Stolper-Samuelson Theorem," Economics and Politics, Blackwell Publishing, vol. 14(2), pages 99-131, 07. [Downloadable!] (restricted)
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  15. repec:fth:prinin:455 is not listed on IDEAS
  16. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-87, January. [Downloadable!] (restricted)
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  17. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier. [Downloadable!] (restricted)
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