1. International Trade, Income Distribution, The Offer Curve, and the Effects of Tariffs*
Theoretical analysis of two important problems – the effects of protection on real wages, and the effects of free international trade on factor prices – has clarified the relationship between the commodity prices established in international trade equilibrium and the corresponding prices of factors of production, within the framework of the Heckscher-Ohlin model of international trade.1 Both the central theoretical principle – that an increase in the relative price of a commodity shifts production towards that commodity and so increases the demand for and marginal productivity of the factor in which the good is intensive – and the diagrammatic apparatus ...
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