Stolper–Samuelson theorem

The Stolper - Samuelson theorem (after the U.S. economists Wolfgang F. Stolper and Paul A. Samuelson ) is a basic model of trade theory. An attempt was one of the central issues in applied economics to answer: how ( for example, by the imposition of duties ) affect changes in prices of goods on the prices of factors of production.

Development of the theorem

The theorem was first unveiled in 1941 by Wolfgang F. Stolper and Paul A. Samuelson. It is an extension of the Heckscher -Ohlin model and thus fits in with the traditional factor proportions models. The original version are limiting idealized assumptions: Reasons for goods price change were seen in commercial policy measures ( imposition of duties ) and only the production factors labor and capital were considered. Further empirical studies ( inter alia by José Scheinkman, Ronald W. Jones) have shown that the basic elements of the theorem generalized and can also be pulled in more global considerations to rate. It also finds its application in the explanation of effects of increasing globalization on income distribution in developed countries and the resulting long-term trade alliances between these countries. Based on the theorem, general statements about the relationship between commodity prices and real income of factors can be taken. The reasons for the changes in these are irrelevant.

Statement of the theorem

Under certain economic conditions ( perfect competition and constant returns ), an increase in the relative price of a commodity (such as due to the establishment of trade relations ) to an increase in the real wage of the factor used intensively in the production. The remuneration of the other factor decreases. The Stolper -Samuelson effect consists of two effects. The distribution effect, which has been previously described and the " magnification effect". This effect implies that the relative price increase of goods prices has a disproportionate effect on the price factor, which is used extensively for the production of the good. Furthermore, stumbling and Samuelson assume that all relevant factors are mobile and can be moved between different industries. Accordingly, an approximation of the relative prices of goods in trade driven countries, the approximation of the relative factor prices of the production factors labor and capital leads.

Derivation

Suppose in an economy are only two goods, cloth and steel, manufactures, where labor and capital are the only factors of production. Under the assumption that material production is a labor intensive and steel production a capital intensive business and that the price of each good is equal to its marginal cost, the theorem can be derived as follows: The prices of fabric and steel are composed of:

(I ) P ( C) = Ar bw

(II), P (S) = cr dw

P ( C) = price for fabric ( cloth )

P ( S) = price of steel ( steel )

R = rent ( rent)

W = wage ( wage )

A, b, c, d = amount of capital employed and work

Postulates:

1 If the price P (C ) of the produced fabric material, including at least one of its factors must be expensive. It can be assumed that the production work factor will increase as the fuel production is labor-intensive industry.

2 An increase in wages, the rent must fall so that equation (II) remains valid. A decline in rent but also affects equation (I). Thus, this remains valid, the rise in wages must be disproportionately to the increase in the price of materials.

3 An increase in the price of a good leads then proportional to an increase in the remuneration of the factor used most intensively, whereas the remuneration of the other factor decreases.