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| Trade and Income Distribution: The Validity of Stolper-Samuelson Theorem and Factor Price Equalization Theory
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Twamzihirwa D. sifuni, Bernard B. Mlilile, Abel F. Moshi
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Abstract:
The paper was assessing the relationship of trade and income distribution while validating the Stolper Samuelson and price factor theorem in practice. The study reviewed the several articles/journals about trade and wage distribution based on Stolper Samuelson theorem and price factor equalization theorem. The major findings show that, in practice, there is unclear evidence on relationship between trade and wage or income distribution. But no general and direct relationship between the trade and wages that holds in any general-equilibrium theory of trade. However, theoretical results with more than two factors, suggest that the determination of wages is not as simple as the Stolper-Samuelson theorem suggests. Wages and other factor prices depend not on trade perse but also on prices of goods. These in turn may be determined primarily in world markets, depending on the size of the country and under special additional assumptions they may even vary systematically with the quantities of trade. Moreover, various models relate wages to prices of goods rather than to trade. It is recommended that comprehensive reviews of studies should be done to explore the existence of relationship between trade and wage/income distribution.
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