A general-equilibrium re-appraisal of the Stolper-Samuelson theorem

This paper conducts a general-equilibrium analysis of the Heckscher-Ohlin model in which product price is endogenized. It applies both marginal and infra-marginal comparative-static analyses to examine the co-movement of factor and product prices. It shows that the Stolper-Samuelson theorem's prediction does not always hold, in particular, it does not always hold inside the diversification cone when changes in production parameters lead to changes in prices; or when the general equilibrium jumps from one structure to another. The result of this paper supports the “everything-possible” theorem and casts doubt on the general applicability of other core trade theorems derived from the same framework as the Stolper-Samuelson theorem.