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Trade and Tradability: Exports, Imports, and Factor Markets in the Salter‐Swan Model
Author(s) -
Thierfelder Karen,
Robinson Sherman
Publication year - 2003
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00081
Subject(s) - economics , commodity , international economics , balance of trade , intermediate good , contrast (vision) , relative price , international trade , monetary economics , macroeconomics , production (economics) , market economy , artificial intelligence , computer science
We extend the Salter‐Swan model to include both factor markets and semi‐traded goods. In our model, changes in relative factor prices depend on changes in world commodity prices, factor endowments, and the trade balance. In contrast, only changes in world commodity prices can affect factor prices in the neoclassical trade model. The inclusion of semi‐traded goods weakens the magnification effect in both the Stolper‐Samuelson and Rybczynski theorems. When imports and domestic goods are poor substitutes, a characteristic of some commodities in developing countries, the sign of the Stolper‐Samuelson theorem is reversed.