The Stolper-Samuelson Theorem Reconsidered : An Example of Ricardian Dynamic Trade Effects

Richard E. Baldwin

Standard trade theory views the capital stock as an endowment. However, trade policy can affect a country's steady-state capital stock. By ignoring the endogeneity of capital, standard analysis is incomplete and can be misleading. For instance, when capital in endogenous, the Stolper-Samuelson theorem incorrectly predicts the long-run impact of a tariff n factor rewards in a 2-by-2 trade model. Moreover, the output effects of a trade policy can be greatly amplified by its indirect effect on the steady-state capital stock. Since this indirect effect may take a very long time to be fully realized, trade policy can have a long-lasting effect on growth. Ricardo first studied this link between trade and steady-state factor supplies

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Year of publication:	September 1989
Authors:	Baldwin, Richard E.
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Faktorpreisausgleich \| Factor price equalization \| Außenwirtschaftstheorie \| International economics \| Handelseffekt \| Trade effect \| Komparativer Vorteil \| Comparative advantage

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