From great depression to great recession
This paper presents an overview of the history of thought on the factor content of trade. It emphasizes that the conditions of factor price equalization do not hold. It describes a theory of destructive trade that is at the root of the Great Recession of 2008 and 2009. Jobs outsourced to low-wage countries may have long-run effects on unemployment in countries that are abundant in capital.
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- R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
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