Abstract
Textbook models of international trade always posit well-functioning, frictionless factor markets. Policy-induced changes in relative output prices lead to the instantaneous reallocation of resources. While trade may result in some winners and losers (à la Stolper-Samuelson), factors are never unemployed and (ignoring terms-of-trade effects) the efficiency gains from trade liberalisation always result in aggregate net benefits.
We gratefully acknowledge useful comments and suggestions provided to us by Rodney Falvey and other participants at the Conference on Globalisation and Labour Markets held at the University of Nottingham, 7–8 July 2000. We are fully responsible for the shortcomings that remain.
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© 2002 International Economic Association
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Davidson, C., Matusz, S.J. (2002). Globalisation, Employment and Income: Analysing the Adjustment Process. In: Greenaway, D., Upward, R., Wakelin, K. (eds) Trade, Investment, Migration and Labour Market Adjustment. The International Economic Association. Palgrave Macmillan, London. https://doi.org/10.1057/9781403920188_5
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DOI: https://doi.org/10.1057/9781403920188_5
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