Contrary to conventional wisdom, this paper shows that a high-wage economy can paradoxically reduce its level of aggregate unemployment by engaging in international trade with low-wage country. We demonstrate possibility after introducing minimum wage into the basic specific-factor model (with immobile capital and mobile labor), even though opposite result is known arise longer-run framework st...

This paper argues that international trade should affect local organization of production in a systematic way. By using the standard Heckscher-Ohlin-Samuelson model we show that the export sector is more likely to demonstrate fragmentation, entrepreneurship and outsourcing compared to the importcompeting sector in a typical labor abundant country. Liberal trade regime will promote entrepreneurs...

World-wide cross-country regressions are used to examine South Asia’ s export structure through the lens of Heckscher± Ohlin trade theory. By comparison with other regions, South Asia’s exports are unusually concentrated on labour-intensive manufactures. This distinctive export structure is shown to be the result mainly of South Asia’s distinctive combination of resources: by comparison with ot...

The theoretical insights of Heckscher and Ohlin, Feenstra and Hanson, and Tang and Wood between them provide a plausible explanation of the varied effects of globalisation on wage inequalities in developed and developing countries. In combination, these three theories can explain, among other things, why inequality has fallen in some developing countries but risen in others. Improved travel and...

In the debate on globalisation and wage inequality HeckscherOhlin theory has featured prominently. However, a neglected mechanism by which globalisation affects labour market outcomes is through the increased tradability of producer services. By integrating elements of Heckscher-Ohlin theory, the economic geography literature and the literature on producer services linkages, we show that the im...

I develop a factor content of trade prediction for the Heckscher-OhlinVanek model (HOV) that relates bilateral differences in country endowments to bilateral differences in factor contents. The results are striking. In comparisons of North-South factor contents or factor contents of countries with very different endowments (e.g., with very different capital-labor ratios), there is clear support...

This paper focuses on the question of whether labour standards can affect comparative advantage in unskilled-labour-intensive goods, and thereby influence trade flows. Using a Heckscher-Ohlin framework, the effects of low labour standards depend on the type of standard: Forced and child labour lead to an increase in the endowment of unskilled labour, and hence improve comparative advantage in u...

This paper studies how income inequality affects the probability of signing free trade agreements (FTAs) in a political economy framework. The median voter approach to FTA formation within a Heckscher-Ohlin framework predicts that an increase in inequality lowers the desirability of an FTA if the partner country is relatively labor abundant, ceteris paribus, and raises the desirability of such ...

The effects of technical progress on relative factor prices in the two-country, two-good, two-factor Heckscher-Ohlin model are investigated. Technical progress is classified according to factor-augmenting bias, factor-using bias, and sector bias. A complete set of relations between technical progress parameters and relative factor prices, depending on the elasticities of substitution in demand ...

In this paper we develop a model of a multi-sector multi-factor small open economy with involuntary unemployment due to fair wages. The model is used inter alia to analyse the labour market effects of changes in unemployment benefits and the domestic labour supply. Our analysis covers both the case where factor prices do not react to endowment changes – as in the Heckscher-Ohlin model – and the...