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International Trade, Factor Mobility and Trade Costs

Author

Listed:
  • Norman, Victor D
  • Venables, Anthony J

Abstract

The authors consider a Heckscher-Ohlin model in which goods and factors of production can be traded but trade involves transactions costs. Goods trade alone will not equalize factor prices, so there is an incentive for factors to move internationally. The authors characterize equilibria in which there is no trade, goods trade only, factor movement only, and both trade in goods and factor movement. This generalizes the Heckscher-Ohlin model to explain not only the direction of trade but also the prior question of what gets traded, i.e., how goods and factors are partitioned into tradeables and nontradeables. Copyright 1995 by Royal Economic Society.

Suggested Citation

  • Norman, Victor D & Venables, Anthony J, 1995. "International Trade, Factor Mobility and Trade Costs," Economic Journal, Royal Economic Society, vol. 105(433), pages 1488-1504, November.
  • Handle: RePEc:ecj:econjl:v:105:y:1995:i:433:p:1488-1504
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    Citations

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    Cited by:

    1. James R. Markusen & Bridget Strand, 2007. "Trade in Business Services in General Equilibrium," NBER Working Papers 12816, National Bureau of Economic Research, Inc.
    2. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
    3. Fafchamps, Marcel, 1997. "Mobile Capital, Local Externalities, and Industrialization," Journal of Comparative Economics, Elsevier, vol. 25(3), pages 345-365, December.
    4. James Markusen, 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," NBER Working Papers 11827, National Bureau of Economic Research, Inc.
    5. Markusen, James R. & Venables, Anthony J, 2005. "A Multi-Country Approach to Factor-Proportions Trade and Trade Costs," CEPR Discussion Papers 4872, C.E.P.R. Discussion Papers.
    6. Springer, Katrin, 2000. "Do We Have to Consider International Capital Mobility in Trade Models?," Kiel Working Papers 964, Kiel Institute for the World Economy (IfW).
    7. SimÛn Sosvilla Rivero & Oscar Bajo Rubio & Carmen DÌaz Rold·n, "undated". "Sobre la efectividad de la polÌtica regional comunitaria: El caso de Castilla-la Mancha," Studies on the Spanish Economy 178, FEDEA.
    8. Bhattarai, Keshab & Mallick, Sushanta, 2013. "Impact of China's currency valuation and labour cost on the US in a trade and exchange rate model," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 40-59.
    9. James Markusen & Bridget Strand, 2008. "Offshoring of Business Services in Small Open Economies: Toward a General-Equilibrium Modeling Approach," Journal of Industry, Competition and Trade, Springer, vol. 8(3), pages 231-246, December.
    10. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F20 - International Economics - - International Factor Movements and International Business - - - General

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