Kiel Working Papers, Kiel Institute for World Economics
No 964:
Do We Have to Consider International Capital Mobility in Trade Models?
Katrin Springer
Abstract: The traditional trade theory predicts that trade in goods
perfectly substitutes for direct movement of factors. This equivalence
between goods trade and factor movements, however, depends crucially on
assumptions about the production. This paper establishes necessary and
sufficient conditions which describe the relationship between goods trade
and capital mobility in a 2x2x2 trade model with internationally mobile
capital. It identifies possible ways of incorporating capital mobility into
a multi-regional, multi-sectoral Computable General Equilibrium framework.
The consideration of capital mobility leads to other allocational and
distributional outcomes of policy scenarios if there exists differences in
production technologies across regions, trade impediments, or distortions
in product or factor markets.
Keywords: Capital Mobility, International Trade, Computable General, Equilibrium Model; (follow links to similar papers)
JEL-Codes: F1; F21; D58; (follow links to similar papers)
50 pages, January 2000
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