REVEALED PREFERENCE TESTS OF THE STOLPER?SAMUELSON THEOREM

What is it about?

The Heckscher–Ohlin model is a standard approach to international trade. An implication of the model is that all owners of abundant factors of production benefit from trade liberalization and all owners of scarce factors are harmed, regardless of the sector of the economy the factors are employed in. This article tests this implication by examining the positions taken by lobby groups in their testimony to the Canadian House of Commons committee hearings on the Canada-United States Free Trade agreement. The study finds strong support that capital behaves as predicted and qualified support that labour behaves as predicted.

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Why is it important?

The Stolper-Samuelson Theorem is a standard prediction that every student who has taken an international trade course has learnt. Understanding its empirical relevance is clearly important.