Who Gains And Loses From Trade

Question 1

Stopler Samuelson Theorem

Answer 1

An event that changed relative product prices unambiguously has 2 effects: it raises real return of factor used intensively in the rising price (export) industry, and lowers the real return to the factor used intensively in falling price (import) industry.

Question 2

Specialised-factor problem

Answer 2

The more a factor is specialised in the production of a product whose relative price is rising, the more the factor stands to gain from the change in product price.

Question 3

International price factor equalisation

Answer 3

With the shift to free trade, for each factor it’s ROR becomes more similar between countries. Under ideal conditions it’s real ROR is the same in different countries.