International Factor Mobility
Somewhat paradoxically, a theory of international trade should offer a set of basic analytical tools that will constitute a frame of reference for the analysis of the international movement of factors of production as well as of commodities and services. The argument that underlies this contention is the analogue of that which ranked the Heckscher-Ohlin theory above the Ricardian doctrine: that a theory of international trade should examine the effects of trade not only upon commodity prices, output and consumption but should also relate the effects of trade back to factor markets and prices and to income distribution. But there is an additional consideration. Factor movements have taken place on a very large scale since World War II and, in the process, have importantly affected the factor endowments of trading nations. In this sense, the analysis of international trade in commodities cannot be examined except in conjunction with an understanding of the international movements of factors of production. It should be a theory of international resource allocation rather than a simple theory of international trade.
KeywordsHuman Capital International Trade Wage Differential International Movement Unskilled Labour
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- 1.See, for example, Bhagwati, Journal of Political Economy, (September/October 1972), p. 1052.Google Scholar
- 2.R. A. Mundell first demonstrated this extreme and somewhat paradoxical case in ‘International Trade and Factor Mobility’, American Economic Review XLVII, (June 1957), pp. 321–35.Google Scholar