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Do We Have to Consider International Capital Mobility in Trade Models?

  • Katrin Springer
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    The traditional trade theory predicts that trade in goods perfectly substitutes for direct movement of factors. This equivalence between goods trade and factor movements, however, depends crucially on assumptions about the production. This paper establishes necessary and sufficient conditions which describe the relationship between goods trade and capital mobility in a 2x2x2 trade model with internationally mobile capital. It identifies possible ways of incorporating capital mobility into a multi-regional, multi-sectoral Computable General Equilibrium framework. The consideration of capital mobility leads to other allocational and distributional outcomes of policy scenarios if there exists differences in production technologies across regions, trade impediments, or distortions in product or factor markets.

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/do-we-have-to-consider-international-capital-mobility-in-trade-models/kap964.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 964.

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    Length: 50 pages
    Date of creation: Jan 2000
    Date of revision:
    Handle: RePEc:kie:kieliw:964
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    1. Purvis, Douglas D, 1972. "Technology, Trade and Factor Mobility," Economic Journal, Royal Economic Society, vol. 82(327), pages 991-99, September.
    2. Saavedra-Rivano, Neantro & Wooton, Ian, 1983. "The choice between international labour and capital mobility in a dynamic model of North-South trade," Journal of International Economics, Elsevier, vol. 14(3-4), pages 251-261, May.
    3. James R. Melvin, 1996. "Trade and Investment with Constant and Increasing Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 361-65, April.
    4. Markusen, James R & Svensson, Lars E O, 1985. "Trade in Goods and Factors with International Differences in Technology," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 175-92, February.
    5. Suzuki, Katsuhiko, 1989. "Choice between international capital and labor mobility for diversified economies," Journal of International Economics, Elsevier, vol. 27(3-4), pages 347-361, November.
    6. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier.
    7. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    8. J. Peter Neary, 1995. "Factor Mobility and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 4-23, November.
    9. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," NBER Working Papers 6559, National Bureau of Economic Research, Inc.
    10. Svensson, Lars E.O., 1984. "Factor trade and goods trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 365-378, May.
    11. Markusen, James R. & Melvin, James R., 1979. "Tariffs, capital mobility, and foreign ownership," Journal of International Economics, Elsevier, vol. 9(3), pages 395-409, August.
    12. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-75, December.
    13. Thompson, Henry, 1994. "An investigation into the quantitative properties of the specific factors model of international trade," Japan and the World Economy, Elsevier, vol. 6(4), pages 375-388, December.
    14. Wilfred J. Ethier & Lars E.O. Svensson, 1983. "The Theorems of International Trade with Factor Mobility," NBER Working Papers 1115, National Bureau of Economic Research, Inc.
    15. McKibbin, W.J. & Wilcoxen, P.J., 1995. "The Theoretical and Empirical Structure of the G-Cubed Model," Papers 118, Brookings Institution - Working Papers.
    16. Norman, Victor D & Venables, Anthony J, 1995. "International Trade, Factor Mobility and Trade Costs," Economic Journal, Royal Economic Society, vol. 105(433), pages 1488-1504, November.
    17. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
    18. J. Bhagwati & R. Brecher, 1978. "National Welfare in an Open Economy in the Presence of Foreign Owned Factors of Production," Working papers 224, Massachusetts Institute of Technology (MIT), Department of Economics.
    19. Brecher, Richard A. & Feenstra, Robert C., 1983. "International trade and capital mobility between diversified economies," Journal of International Economics, Elsevier, vol. 14(3-4), pages 321-339, May.
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