Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2008

Journal or Book Title

International Review of Economics and Finance

Volume

17

Issue

4

First Page or Article ID Number

517

Last Page

528

DOI

10.1016/j.iref.2007.03.001

Abstract

This paper considers two simple questions relating to the Heckscher–Ohlin model: (i) How does factor growth affect the terms of trade between the North and the South? (ii) If factor prices are equalized by trade, at what levels are they equalized? Regardless of where it occurs, labor growth improves the terms of trade of the capital-abundant region, whereas capital growth has the opposite effect. Equalized factor prices are “less” than a convex combination of autarky factor prices. A numerical example using Cobb-Douglas production and utility functions illustrates the propositions.

JEL Classification

F1

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Economics and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Economics and Finance 17 (2008), doi:10.1016/j.iref.2007.03.001.

Copyright Owner

Elsevier Inc.

File Format

application/pdf

Published Version

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