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Factor Prices and International Trade: A Unifying Perspective

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  • Ariel Burstein
  • Jonathan Vogel

Abstract

How do trade liberalizations affect relative factor prices and to what extent do they cause factors to reallocate across sectors? We first present a general framework that nests a wide range of models that have been used to study the link between globalization and factor prices. Under some restrictions, changes in the "factor content of trade" are sufficient statistics for the impact of trade on relative factor prices. We then study the determination of the factor content of trade in a specific version of our general framework featuring imperfect competition, increasing returns to scale, and heterogeneous producers. We show how heterogeneous firms' decisions shape the factor content of trade, and, therefore, the impact of trade liberalization on relative factor prices and between-sector factor allocation.

Suggested Citation

  • Ariel Burstein & Jonathan Vogel, 2011. "Factor Prices and International Trade: A Unifying Perspective," NBER Working Papers 16904, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16904
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    References listed on IDEAS

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    Cited by:

    1. Louis Dupuy & Matthew Agarwala, 2014. "International trade and sustainable development," Chapters,in: Handbook of Sustainable Development, chapter 25, pages 399-417 Edward Elgar Publishing.
    2. Lechthaler, Wolfgang & Mileva, Mariya, 2013. "Trade liberalization and wage inequality: New insights from a dynamic trade model with heterogeneous firms and comparative advantage," Kiel Working Papers 1886, Kiel Institute for the World Economy (IfW).
    3. repec:eee:inteco:v:151:y:2017:i:c:p:26-47 is not listed on IDEAS
    4. Gabriel Felbermayr & Mario Larch & Wolfgang Lechthaler, 2012. "The Shimer-Puzzle of International Trade: A Quantitative Analysis," ifo Working Paper Series 134, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. William R. Kerr, 2013. "Heterogeneous Technology Diffusion and Ricardian Trade Patterns," NBER Working Papers 19657, National Bureau of Economic Research, Inc.
    6. Yong Wang & Xuewen Liu & Xi Li, 2013. "A Model of China's State Capitalism," 2013 Meeting Papers 853, Society for Economic Dynamics.
    7. Gabriel Felbermayr & Benjamin Jung, 2011. "Home Market Effects and the Single-Sector Melitz Model," CESifo Working Paper Series 3695, CESifo Group Munich.
    8. repec:eee:inecon:v:106:y:2017:i:c:p:83-103 is not listed on IDEAS
    9. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2012. "Tariffs and welfare in new trade theory models," University of Tuebingen Working Papers in Economics and Finance 41, University of Tuebingen, Faculty of Economics and Social Sciences.
    10. Nils Herger, 2015. "An uncovered interest parity condition that worked - The continental investment demand for London bills of exchange during the gold standard (1880 -1914)," Working Papers 15.04, Swiss National Bank, Study Center Gerzensee.
    11. French, Scott, 2017. "Revealed comparative advantage: What is it good for?," Journal of International Economics, Elsevier, vol. 106(C), pages 83-103.
    12. Gabriel Felbermayr & Benjamin Jung, 2012. "Unilateral Trade Liberalization in the Melitz Model: A Note," Economics Bulletin, AccessEcon, vol. 32(2), pages 1724-1730.
    13. Auer, Raphael A., 2015. "Human capital and the dynamic effects of trade," Journal of Development Economics, Elsevier, vol. 117(C), pages 107-118.
    14. Julie Regolo, 2013. "Export Diversification: How Much Does the Choice of the Trading Partner Matter?," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 13072, Institut d'Economie et Econométrie, Université de Genève.
    15. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, Elsevier.
    16. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    17. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Journal of International Economics, Elsevier, vol. 89(1), pages 13-25.
    18. Ariel Burstein & Javier Cravino & Jonathan Vogel, 2013. "Importing Skill-Biased Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 32-71, April.
    19. Regolo, Julie, 2013. "Export diversification: How much does the choice of the trading partner matter?," Journal of International Economics, Elsevier, vol. 91(2), pages 329-342.
    20. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    21. Ildikó Magyari, 2017. "Firm Reorganization, Chinese Imports, and US Manufacturing Employment," Working Papers 17-58, Center for Economic Studies, U.S. Census Bureau.
    22. repec:eee:eecrev:v:98:y:2017:i:c:p:316-340 is not listed on IDEAS
    23. repec:gen:geneem:13032 is not listed on IDEAS
    24. repec:eee:inecon:v:106:y:2017:i:c:p:1-19 is not listed on IDEAS

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    JEL classification:

    • F1 - International Economics - - Trade

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