What's the Use of Factor Contents?
The net imports of labor embodied in international trade has been a fairly small and stable share of the US labor force. From this some conclude that trade has not been a major contributor to the income inequality trends. This is a non sequitur. The labor embodied in trade is jointly determined by tastes, technologies, factor supplies and the external goods market. Although it is impossible to use factor contents to disentangle trade from technology, the factor contents can be used to suggest the change of earnings shares if the country were to close down external trade entirely. However, this is a proper application of factor contents only if tastes and technologies are log-linear, if trade is balanced and if foreign input intensities are used to compute factor contents of non-competing imports. Factor contents are virtually useless if technologies and tastes are not log-linear, or if the external deficit is substantial and variable. Factor contents do not tell us anything about earnings levels as opposed to shares. They also do not inform us of the impact of partial trade barriers that change relative product prices but do not completely eliminate trade. In other words, the title question is rhetorical.
|Date of creation:||Feb 1996|
|Publication status:||published as Journal of International Economics, Vol.50, no.1 (February 2000): 17-50.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:fth:michin:341 is not listed on IDEAS
- Krugman, Paul R., 2000.
"Technology, trade and factor prices,"
Journal of International Economics,
Elsevier, vol. 50(1), pages 51-71, February.
- Paul Krugman, 1995. "Technology, Trade, and Factor Prices," NBER Working Papers 5355, National Bureau of Economic Research, Inc.
- Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
- Robert E. Baldwin, 1995. "The Effects of Trade and Foreign Direct Investment on Employment and Relative Wages," NBER Working Papers 5037, National Bureau of Economic Research, Inc.
- Robert E. Baldwin, 1995. "The Effects of Trade and Foreign Direct Investment on Employment and Relative Wages," OECD Jobs Study Working Papers 4, OECD Publishing.
- Jeffrey D. Sachs & Howard J. Shatz, 1994. "Trade and Jobs in Manufacturing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 1-84.
- Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155.
- Hakura, D. & Deardorff, A.V., 1993. "Trade and Wages: What Are the Questions?," Working Papers 341, Research Seminar in International Economics, University of Michigan.
- Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
- Harry P. Bowen & Edward E. Leamer & Leo Sveikauskas, 1986. "Multicountry, Multifactor Tests of the Factor Abundance Theory," NBER Working Papers 1918, National Bureau of Economic Research, Inc.
- Deardorff, Alan V. & Staiger, Robert W., 1988. "An interpretation of the factor content of trade," Journal of International Economics, Elsevier, vol. 24(1-2), pages 93-107, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5448. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.