Factor Prices and International Trade: A Unifying Perspective

Ariel Burstein and Jonathan Vogel

No 16904, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How do trade liberalizations affect relative factor prices and to what extent do they cause factors to reallocate across sectors? We first present a general framework that nests a wide range of models that have been used to study the link between globalization and factor prices. Under some restrictions, changes in the "factor content of trade" are sufficient statistics for the impact of trade on relative factor prices. We then study the determination of the factor content of trade in a specific version of our general framework featuring imperfect competition, increasing returns to scale, and heterogeneous producers. We show how heterogeneous firms' decisions shape the factor content of trade, and, therefore, the impact of trade liberalization on relative factor prices and between-sector factor allocation.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2011-03
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (41)

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