Factor prices and the factor content of trade revisited: what's the use?

This paper examines and extends a result of Deardorff and Staiger (An interpretation of the factor content of trade. Journal of International Economics 1988;24:93-107) (D-S), who showed how the factor content of trade may indicate the factor price adjustments that can be attributed to that trade. It elaborates on what this means, and also extends it beyond several of the assumptions that D-S used. The strongest result, in D-S only for Cobb-Douglas technology, is extended to common constant elasticities of substitution and, for small changes, more general technologies. Also, the assumption of nonspecialization is shown to be unnecessary with Cobb-Douglas technology. More generally, noncompeting imports equate with Hicks-neutral technological improvements. (C) 2000 Elsevier Science B.V. All rights reserved.