Stolper–Samuelson Revisited: Trade and Distribution with Oligopolistic Profits
Robert A. Blecker
American University; American University - Center for Latin American & Latino Studies (CLALS)
Metroeconomica, Vol. 63, Issue 3, pp. 569-598, 2012
This paper investigates the distributional impact of international trade when goods markets are oligopolistic and firms partially pass‐through changes in tariffs into prices and factor costs for differentiated products. Trade liberalization raises mark‐ups and profit shares in the export industry and lowers them in the import‐competing industry, while Stolper–Samuelson effects on real prices of primary factors are attenuated or possibly reversed. An extended model shows how ‘offshoring’ (trade in intermediate goods) can potentially increase mark‐ups for oligopolistic producers of final goods. The analysis illuminates why business interests generally support trade liberalization policies today, regardless of their countries' factor abundance.
Number of Pages in PDF File: 30
Date posted: June 5, 2012