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International Factor Mobility, Nontraded Goods, and the International Equalization of Prices of Goods and Factors

Carlos Alfredo Rodriguez

Abstract

Within the context of a world where some goods may be nontraded and some factors may be internationally mobile, this paper analyzes the conditions under which trade in factors can replace trade in goods in the presence of tariffs or taxes.The crucial issue regarding the perfect substitutability between trade in goods and trade in factors turns out to be whether the sufficient conditions for international equalization of prices of goods and factors are exactly met, not met, or met in excess.