Factor Scarcity, Factor Abundance and Attitudes Towards Protection: The 3×3 Model

Abstract

The Stolper-Samuelson Theorem is still alive and well-and being debated-after fifty years. The original statement of the theorem was couched in a two-factor, two commodity setting in which technology exhibits constant returns to scale and the absence of joint production. Competitive pressures then ensure that if a policy of tariff protection raises the relative domestic price of importables, the real re ward to the productive factor used intensively in the import-competing sector must unambiguously rise. The logic is impeccable, but subsequent attempts to expand the dimensionality of the setting have been less successful in pinning down the effects of protection on real factor returns, a result perhaps neither unwarranted nor undesirable since it reveals that relationships among a small subset of varia bles can be altered by conditions of technology and relative endowments concern ing other variables in the model. A few years after the appearance of the Stolper-Samuelson Theorem a pair of articles by Lloyd Metzler [1949a, 1949b] suggested the possibility that for a large country a tariff might not be protective. If such a (Metzler) paradox were to pre vail, a tariff would be opposed by labor if the import-competing good were labor intensive. I suspect that the Metzler possibility, suggesting a reversal of the Stolper Samuelson Theorem as originally stated, was instrumental in causing the theorem to be recast in terms of the effect of changes in domestic commodity prices on the rewards to domestic factors. It was this commodity price-factor price link that was so painstakingly (and frustratdngly) analyzed in the late 1960's and early 1970's by Kemp and Wegge [1969], Chipman [1969], Uekawa [1971], Inada [1971] and others. By contrast, a recent piece by Learner [1991] serves as a reminder of the trade setting of the original argument. Learner raises the question of the atti