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CO‐MOVEMENTS IN RELATIVE COMMODITY PRICES AND INTERNATIONAL CAPITAL FLOWS: A SIMPLE MODEL
Author(s) -
JONES RONALD W.
Publication year - 1989
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1989.tb01168.x
Subject(s) - economics , commodity , presumption , capital (architecture) , capital flows , monetary economics , fixed capital , international economics , macroeconomics , financial capital , capital formation , market economy , human capital , liberalization , archaeology , political science , law , history
Suppose a number of countries produce a commodity which employs local labor and a type of capital that is internationally mobile. Within the framework of a specific‐factors model the paper argues that there is a presumption about the international movement of capital when the relative price of the industry using that capital rises on world markets. Capital flows towards countries less heavily involved in producing the commodity; internal labor flows contribute toward worldwide industry dispersion; and the volume of international trade in that commodity tends to fall.