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Trade Theorems with Search Unemployment

Yu Sheng () and Xinpeng Xu ()

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: We revisit the Heckscher-Ohlin-Samuelson model in the presence of labor market frictions à la Mortensen-Pissarides. Relaxing the assumption of the oneworker-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 only valid for capital and unemployed labor across countries, but not for employed labor. 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)
Pages: 37 Pages
Date: 2010-08
New Economics Papers: this item is included in nep-dge, nep-int and nep-lab
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Journal Article: Trade theorems with search unemployment (2010) Downloads
Journal Article: Trade theorems with search unemployment (2010) Downloads
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