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International trade, factor mobility, and trade costs

Norman, VD and Venables, Tony (1995) International trade, factor mobility, and trade costs. The Economic Journal, 105 (433). pp. 1488-1504. ISSN 0013-0133

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We consider a Heckscher-Ohlin model in which goods and factors of production can be traded, but trade involves transactions costs. Goods trade alone will not equalise factor prices, so there is an incentive for factors to move internationally. We characterise equilibria in which there is no trade, good trades only, factor movement only, and both trade in goods and factor movement. This generalised the Heckscher-Ohlin model to explain not only the direction of trade, but also the prior question of what gets traded, i.e. how goods and factors are partitioned into tradeables and non-tradeables.

Item Type: Article
Official URL:
Additional Information: © 1995 Royal Economic Society
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: F - International Economics > F2 - International Factor Movements and International Business
Date Deposited: 27 Apr 2007
Last Modified: 20 Nov 2019 06:28

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