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The trade-wage debate in a model with nontraded goods: making room for labor economists in labor theory

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  • Robinson, Sherman
  • Thierfelder, Karen

Abstract

The Heckscher-Ohlin-Samuelson (HOS) model in international trade theory provides a powerful general-equilibrium paradigm for analyzing the impact of changes in trade on factor returns. In the HOS model, factor returns are determined solely by commodity prices, which are determined on large world markets. Changes in factor supplies affect the structure of production and trade, but not relative factor returns. In this framework, there is little room for labor economists who focus on partial-equilibrium analysis of supply and demand in factor markets. The authors extend the HOS model to include "nontraded" goods, distinguishing them theoretically from "nontradable" goods. The resulting 1-2-2-3 model applied to one country with two production activities using two factors of production but consuming a third imported good. We show that the HOS model is a special case of the 1-2-2-3 model when imports and domestic goods are perfect substitutes.

Suggested Citation

  • Robinson, Sherman & Thierfelder, Karen, 1996. "The trade-wage debate in a model with nontraded goods: making room for labor economists in labor theory," TMD discussion papers 9, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:tmddps:9
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    Citations

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    Cited by:

    1. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," Research Department Publications 4116, Inter-American Development Bank, Research Department.
    2. Karen Thierfelder & Sherman Robinson, 2003. "Trade and Tradability: Exports, Imports, and Factor Markets in the Salter‐Swan Model," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 103-111, March.
    3. Eduardo Lora & Mauricio Olivera, 1998. "Políticas macro y problemas del empleo en América Latina," Research Department Publications 4117, Inter-American Development Bank, Research Department.
    4. Rakotoarisoa, M.A. & Randriamamonjy, J., 2018. "Assessing Agricultural Policy for Targeted Reforms in Sub-Saharan Africa," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277309, International Association of Agricultural Economists.
    5. Adrian Wood (ODID), "undated". "A practical Heckscher-Ohlin model," QEH Working Papers qehwps170, Queen Elizabeth House, University of Oxford.
    6. Nancy Benjamín & Peter Pogany, 1998. "Modeling Competitiveness in Hemispheric Trade Liberalization: An Application to Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 35(104), pages 127-138.

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