Trade theorems with search unemployment

Yu Sheng, Xinpeng Xu

    Research output: Contribution to journalArticle

    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.
    Original languageEnglish
    Pages (from-to)795-815
    JournalCanadian Journal of Economics
    Volume43
    Issue number3
    DOIs
    Publication statusPublished - 2010

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