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Trade, Migration, and Inequality in a World without Factor Price Equalization

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  • Paul Oslington
  • Isaac Towers

Abstract

The behavior of trading economies in the absence of factor price equalization is not well understood, although empirical evidence against factor price equalization is overwhelming. We map regions of diversification and specialization for competitive world economies with different factor endowment partitions. Goods and factor price responses as economies move within and across different regions of specialization are explored using a series of novel diagrams. The usefulness of endogenizing patterns of specialization is illustrated by considering the impact on inequality of migration flows (such as US-Mexico), the substitutability of trade and migration, and the impact of the entry of a large unskilled labor-intensive economy (such as China) on factor prices and factor flows. Copyright © 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Paul Oslington & Isaac Towers, 2010. "Trade, Migration, and Inequality in a World without Factor Price Equalization," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 650-662, September.
  • Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:650-662
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    References listed on IDEAS

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    1. Oslington, Paul, 2002. "Factor market linkages in a global economy," Economics Letters, Elsevier, vol. 76(1), pages 85-93, June.
    2. Udo Kreickemeier & Douglas Nelson, 2017. "Fair Wages, Unemployment, and Technological Change in a Global Economy," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 8, pages 205-235 World Scientific Publishing Co. Pte. Ltd..
    3. Wen Li Cheng & Jeffrey Sachs & Xiaokai Yang, 2005. "A General-Equilibrium Re-Appraisal Of The Stolper-Samuelson Theorem," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 8, pages 131-149 World Scientific Publishing Co. Pte. Ltd..
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    6. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
    7. Paul Oslington & Isaac Towers, 2009. "Pushing Economies (and Students) Outside the Factor Price Equalization Zone," The Journal of Economic Education, Taylor & Francis Journals, vol. 40(4), pages 422-436, October.
    8. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    9. Christis G. Tombazos & Xiaokai Yang & Dingsheng Zhang, 2005. "A Neo-Heckscher-Ohlin Model of Trade with Endogenous Production Patterns," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages 71-81, August.
    10. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-999, October.
    11. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
    12. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, January.
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    Cited by:

    1. Lorenzo Caliendo, 2010. "On the Dynamics of the Hecksher-Ohlin Theory," Working Papers 2010-011, Becker Friedman Institute for Research In Economics.
    2. Alfred Sitz & Friedrich Sindermann, 2009. "Unemployment and International Trade: The Effects of Minimum Wages and Non-Traded Goods in Models representing Western Industrialized Countries and China (in German)," FIW Working Paper series 024, FIW.

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