Non-competing factor groups and the normative propositions of trade theory
The Walras-Arrow-Debreu-McKenzie model of general equilibrium forms the basis of almost all normative trade theory. In that model, a factor of production might be completely or incompletely immobile between alternative occupations. Whether it ever abandons an initial occupation depends on the cost of moving to each of the alternative occupations. It is not to be expected that, in equilibrium, a factor will receive the same reward in each occupation; non-competitive factor groups will be the rule. It is puzzling then that, in recent years, normative trade theory has developed in complete denial of non-competing groups. It is here shown that the occupational immobility of factors does not endanger any of the well-known normative propositions of the theory of international trade.
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- Grandmont, J. M. & McFadden, D., 1972. "A technical note on classical gains from trade," Journal of International Economics, Elsevier, vol. 2(2), pages 109-125, May.
- Murray Kemp & Henry Wan, 1986. "The comparison of second-best equilibria: The case of customs unions," Journal of Economics, Springer, vol. 5(1), pages 161-167, December.
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- Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
- Kemp, Murray C & Wan, Henry Y, Jr, 1972. "The Gains from Free Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 509-522, October.
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