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Trade Theorems with Search Unemployment

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  • Yu Sheng
  • Xinpeng Xu

    ()

Abstract

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.

Suggested Citation

  • Yu Sheng & Xinpeng Xu, 2010. "Trade Theorems with Search Unemployment," ANU Working Papers in Economics and Econometrics 2010-525, Australian National University, College of Business and Economics, School of Economics.
  • Handle: RePEc:acb:cbeeco:2010-525
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp525.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Trade theorems revisited
      by Economic Logician in Economic Logic on 2010-09-15 19:10:00

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    Cited by:

    1. Xinpeng Xu & Yu Sheng, 2014. "Terms of Trade Shocks and Endogenous Search Unemployment: A Two-Sector Model with Non-Traded Goods," Pacific Economic Review, Wiley Blackwell, vol. 19(2), pages 201-215, May.
    2. Sugata Marjit & Saibal Kar, 2019. "International Capital Flows, Land Conversion and Wage Inequality in Poor Countries," Open Economies Review, Springer, vol. 30(5), pages 933-945, November.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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