Co-movements in Relative Commodity Prices and International Capital Flows: A Simple Model

Ronald Jones

Economic Inquiry, 1989, vol. 27, issue 1, 131-41

Abstract: Suppose a number of countries produce a commodity that employs local labor and a type of capital that is internationally mobile. Within the framework of a specific-factors model, this 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 toward 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. Copyright 1989 by Oxford University Press.

Date: 1989
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