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Trade Theorems with Search Unemployment

  • Yu Sheng
  • Xinpeng Xu

    ()

We revisit the Heckscher-Ohlin-Samuelson model in the presence of labor market frictions à la Mortensen-Pissarides. Relaxing the assumption of the oneworker-one-firm matching rule, we show that the Stolper-Samuelson theorem and the Rybczynski theorem may not hold in specific circumstances. We also demonstrate that the Factor Price Equalization theorem is only valid for capital and unemployed labor across countries, but not for employed labor. In equilibrium, trade patterns are determined by countries’ factor endowments and relative factor intensities in sectors (independent of factor intensities in production). Finally, our results suggest an additional explanation for the “missing trade” phenomenon.

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File URL: http://cbe.anu.edu.au/researchpapers/econ/wp525.pdf
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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2010-525.

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Length: 37 Pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:acb:cbeeco:2010-525
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