What is the Stolper-Samuelson Factor Price Equalization Theorem?

What is the Stolper-Samuelson Factor Price Equalization Theorem?

The Stolper–Samuelson theorem is closely linked to the factor price equalization theorem, which states that, regardless of international factor mobility, factor prices will tend to equalize across countries that do not differ in technology.

What is the Stolper-Samuelson effect?

The Stolper-Samuelson theorem (SST) simply suggests that, in any particular country, a rise in the relative (producer) prices of the labour intensive good will make labour better off and capital worse-off, and vice-versa, provided that some amount of each good is being produced.

What does the Stolper-Samuelson theorem postulate?

stolper-samualson theorem postulates that the imposition of tariff by a nation causes the real income of the factors of nation’s (1) both scarce and abunda.

What is the Stolper-Samuelson theorem group of answer choices?

The Stolper-Samuelson theorem predicts that free trade between the United States, a capital-abundant country, and Mexico, a labor-abundant country, would ultimately result in: higher wages in both countries. b. lower wages in both countries.

What does the Stolper-Samuelson theorem predict about the distribution implications of free trade?

The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country’s abundant factor. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense.

What makes the Stolper-Samuelson theorem different than the Ricardo Viner model?

The Stolper-Samuelson Theorem holds that an industry with relative factor abundance will advocate for free trade, while one with relative scarcity will advocate for managed trade. The Ricardo-Viner theorem, however, assumes that factors are specific to their industries, and that capital might not be mobile.

When trade is based on factors Stolper-Samuelson predicts that country abundant factors will benefit from trade?

The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country’s abundant factor. For developing countries, this suggests liberalization will principally benefit the abundant unskilled labor. Yet extensive empirical studies have identified many cases with a contrary result.

What is protectionism in international political economy?

protectionism, policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors.

What makes the Stolper Samuelson theorem different than the Ricardo Viner model?

What is the difference between the Ricardian model and specific factors model?

Unlike in the Ricardian model, labor is shared between the two industries. Thus, the specific factors model explains why a country produces a product and also imports it. For instance, the US produces but also imports oil from the Middle East. The exact output mix depends on the prices.

How does the Ricardo Viner model differ from Stolper Samuelson?

What is the Stolper-Samuelson theorem?

The Stolper–Samuelson theorem is a basic theorem in Heckscher–Ohlin trade theory. It describes the relationship between relative prices of output and relative factor rewards—specifically, real wages and real returns to capital.

What is the Heckscher-Ohlin theorem?

The original Heckscher–Ohlin model was a two-factor model with a labor market specified by a single number. Therefore, the early versions of the theorem could make no predictions about the effect on the unskilled labor force in a high-income country under trade liberalization.

When was the Heckscher-Ohlin model derived?

It was derived in 1941 from within the framework of the Heckscher–Ohlin model by Wolfgang Stolper and Paul Samuelson, but has subsequently been derived in less restricted models. As a term, it is applied to all cases where the effect is seen.

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