Analysis Of The Stolper-Samuelson Theorem

Sarah Little
August 17, 2015
Final Exam
Essay 1
The Stolper-Samuelson Theorem is a theorem that describes the relationship between relative prices of output and relative factor rewards, specifically, real wages and real returns to capital. By pinpointing a conflict of interest between the ruling elite and workers over trade policy, the theorem implies that workers may have an incentive to mount a revolution. However, this also implies that the elite can use trade policy to make concessions to the workers and hence avert a revolution.
Rogowski believes that changes in a state 's exposure to trade should have profound effects on its domestic political division. This political division can create factors such as: war, another country 's tariff rates, and changes in shipping prices which change a country 's acquaintance to trade. The Stolper-Samuelson theorem says that trade liberalization benefits holders of abundant resources but hurts holders of scarce resources.

Self-interest has a major effect with the desire for free trade because the level of skill the workers exhibit relies directly on their wages. So unskilled workers continue to receive lower and lower wages through the demand of free trade and the demand of quality workers. With the rise in labor standards, unskilled workers find less and less work so they obviously object to free trade. Environmental concerns stem from environmentalists believing that free trade would stimulate economic growth and harm the environment. Coughlin goes on to state that people were concerned about U.S. jobs because of the lack on international environmental standards and that caused skepticism for free