《International_Trade_and_Factor_Mobility》.doc

Homepage ? ?International economics International Economics, Robert A. Mundell, New York: Macmillan, 1968, pp. 85-99. International Trade and Factor Mobility1,2 Robert A. Mundell Commodity movements and factor movements are substitutes. The absence of trade impediments implies commodity-price equalization and, even when factors are Immobile, a tendency toward factor-price equalization. It is equally true that perfect factor mobility results in factor-price equalization and, even when commodity movements cannot take place, in commodity-price equalization. There are two extreme cases between which are to be found the conditions in the real world: There may be perfect factor mobility but no trade, or factor immobility with unrestricted trade. The classical economists generally chose the special case where factors of production were internationally immobile. This paper will describe some of the effects of relaxing the latter assumption, allowing not only commodity movements but also some degree of factor mobility. Specifically it will show that an increase in trade impediments stimulates factor movements and that an increase in restrictions to factor movements stimulates trade.3 It will also make more specific an old argument for protection. Trade Impediments and Factor Movements Under certain rigorous assumptions the substitution of commodity for factor movements will be complete. In a two-country two-commodity two-factor model, commodity-price equalization is sufficient to ensure factor-price equalization and factor-price equalization is sufficient to ensure commodity-price equalization if (1) production functions are homogeneous of the first degree (that is, if marginal productivities, relatively and absolutely, depend only on the proportions in which factors are combined) and are identical in both countries; (2) one commodity requires a greater proportion of one factor than the other commodity at any factor prices at all points on any production function; and