Globalisation and Factor Returns in Competitive Markets

GEP Working Paper No. 2002/32

21 Pages Posted: 16 Jul 2003

See all articles by Rod Falvey

Rod Falvey

Bond University - Department of Economics

Udo Kreickemeier

University of Tuebingen; CESifo (Center for Economic Studies and Ifo Institute); University of Goettingen (Göttingen) - Faculty of Economics and Business Administration

Date Written: December 2002

Abstract

The standard competitive trade model, extended to include many goods and factors, is used to establish two results. First, integration of goods markets decreases on average international disparities in the real returns of internationally immobile factors, irrespective of whether there is international factor mobility or not. Second, integration of factor markets has the same effect, and this result holds in the presence of nontraded goods. We conclude that globalisation, a process of increasing freedom for international movements of goods and factors, will tend to reduce international disparities in the real returns to factors.

Keywords: Factor Mobility, Factor Real Returns, Non-traded Goods

JEL Classification: F11, F16

Suggested Citation

Falvey, Rod and Kreickemeier, Udo, Globalisation and Factor Returns in Competitive Markets (December 2002). GEP Working Paper No. 2002/32, Available at SSRN: https://ssrn.com/abstract=410769 or http://dx.doi.org/10.2139/ssrn.410769

Rod Falvey (Contact Author)

Bond University - Department of Economics ( email )

Bond University - Department of Economics
Gold Coast, Queensland 4229
Australia

Udo Kreickemeier

University of Tuebingen ( email )

DE-72074 Tubingen
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Goettingen (Göttingen) - Faculty of Economics and Business Administration ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany