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Were Trade and Factor Mobility Substitutes in History?

Author

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  • Collins, William J
  • O'Rourke, Kevin Hjortshøj
  • Williamson, Jeffrey G

Abstract

Trade theorists have come to understand that their theory is ambiguous on the question: are trade and factor flows substitutes? While this sounds like an open invitation for empirical research, hardly any serious econometric work has appeared in the literature. This paper uses history to fill the gap. It treats the experience of the Atlantic economy between 1870 and 1940 as panel data with almost 700 observations. When shorter run business cycles and ‘long swings’ are extracted from the panel data, substitutability is soundly rejected. When secular relationships are extracted over longer time periods and across trading partners, once again substitutability is soundly rejected. Finally, the paper explores immigration policy and finds that policy-makers never behaved as if they viewed trade and immigration as substitutes.

Suggested Citation

  • Collins, William J & O'Rourke, Kevin Hjortshøj & Williamson, Jeffrey G, 1997. "Were Trade and Factor Mobility Substitutes in History?," CEPR Discussion Papers 1661, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1661
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    References listed on IDEAS

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    1. Anderson, James E & Neary, J Peter, 1994. "Measuring the Restrictiveness of Trade Policy," World Bank Economic Review, World Bank Group, vol. 8(2), pages 151-169, May.
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    3. Schmitz, Andrew & Helmberger, Peter, 1970. "Factor Mobility and International Trade: The Case of Complementarity," American Economic Review, American Economic Association, vol. 60(4), pages 761-767, September.
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    9. Ashley S. Timmer & Jeffrey G. Williamson, 1996. "Racism, Xenophobia or Markets? The Political Economy of Immigration Policy Prior to the Thirties," NBER Working Papers 5867, National Bureau of Economic Research, Inc.
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    12. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
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    More about this item

    Keywords

    Factor Mobility; Trade;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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