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Were Trade and Factor Mobility Substitutes in History?

  • William J. Collins
  • Kevin H. O'Rourke
  • Jeffrey Williamson

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 seven hundred 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.

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File URL: http://www.nber.org/papers/w6059.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6059.

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Date of creation: Jun 1997
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Publication status: published as Migration: The Controversies and the Evidence, Faini, R., J. DeMelo and K. Zimmerman, eds., Cambridge: Cambridge University Press, 1999.
Handle: RePEc:nbr:nberwo:6059
Note: DAE ITI
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  1. Kemp, Murray C. & Ohyama, Michihiro, 1978. "On the sharing of trade gains by resource-poor and resource-rich countries," Journal of International Economics, Elsevier, vol. 8(1), pages 93-115, February.
  2. Anderson, James E & Neary, J Peter, 1994. "Measuring the Restrictiveness of Trade Policy," World Bank Economic Review, World Bank Group, vol. 8(2), pages 151-69, May.
  3. O'Rourke, Kevin H., 1997. "Measuring protection: a cautionary tale," Journal of Development Economics, Elsevier, vol. 53(1), pages 169-183, June.
  4. Taylor, A.M., 1991. "Capital Flows to the New World as an Intergenerational Transfer," Harvard Institute of Economic Research Working Papers 1579, Harvard - Institute of Economic Research.
  5. Henry Thompson, 1985. "Complementarity in a Simple General Equilibrium Production Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 616-21, August.
  6. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
  7. J. Peter Neary, 1995. "Factor Mobility and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 4-23, November.
  8. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
  9. Anthony J. Venables, 1997. "Trade Liberalisation and Factor Mobility: An Overview," CEP Discussion Papers dp0352, Centre for Economic Performance, LSE.
  10. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
  11. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, June.
  12. 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.
  13. 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.
  14. Schmitz, Andrew & Helmberger, Peter, 1970. "Factor Mobility and International Trade: The Case of Complementarity," American Economic Review, American Economic Association, vol. 60(4), pages 761-67, September.
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