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Is Stolper-Samuelson dangerous and FPE a failure?

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  • Rassekh, Farhad

Abstract

The Heckscher-Ohlin model has spawned the twin theorems of Stolper-Samuelson and factor-price equalization (FPE), both of which concern the effects of international trade on wages and income distribution. A recent literature, critical of both theorems, claims that they no longer serve as a useful guide for understanding the complex web of trade and wages. This literature also claims that the twin theorems are empirically misleading and irrelevant. The present essay argues that the critics have exaggerated the empirical failure of the twin theorems and, more importantly, they have missed the central message of the theorems; especially, that of Stolper-Samuelson on the optimality of free trade.

Suggested Citation

  • Rassekh, Farhad, 2010. "Is Stolper-Samuelson dangerous and FPE a failure?," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 555-561, October.
  • Handle: RePEc:eee:reveco:v:19:y:2010:i:4:p:555-561
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    1. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314 World Scientific Publishing Co. Pte. Ltd..
    2. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
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    4. Kevin H. O'Rourke & Jeffrey G. Williamson, 1999. "The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why," NBER Working Papers 7411, National Bureau of Economic Research, Inc.
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    10. Mokhtari, Manouchehr & Rassekh, Farhad, 1989. "The Tendency towards Factor Price Equalization among OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 636-642, November.
    11. Sachs, Jeffrey D & Shatz, Howard J, 1996. "U.S. Trade with Developing Countries and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 234-239, May.
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