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Trade theorems with search unemployment

Yu Sheng () and Xinpeng Xu ()

Canadian Journal of Economics, 2010, vol. 43, issue 3, 795-815

Abstract: We revisit the Heckscher-Ohlin-Samuelson model in the presence of labour market frictions à la Mortensen-Pissarides. Relaxing the assumption of the one-worker-one-firm matching rule, we show that the Stolper-Samuelson theorem and the Rybczynski theorem may not hold in specific circumstances. We also demonstrate that the Factor Price Equalization theorem is valid only for capital and unemployed labour across countries, but not for employed labour. In equilibrium, trade patterns are determined by countries' factor endowments and relative factor intensities in sectors (independent of factor intensities in production). Finally, our results suggest an additional explanation for the `missing trade' phenomenon.

JEL-codes: F16 J64 (search for similar items in EconPapers)
Date: 2010
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