International factor movements, commodity trade and commercial policy in a specific factor model

Abstract

Two events in the decade of the 1970s had a major impact on world trade and factor movements: the collapse of the Bretton-Woods fixed-exchange rate system and OPEC’s success in raising petroleum prices. The enormous current account surplus accruing to some of the OPEC members was successfully recycled by the international capital markets to, among others, the oil-importing developing countries. In addition, the vastly increased tempo of investment in the capital-rich labour-poor OPEC members in West Asia attracted migration of labour (skilled as well as unskilled) to these countries from some of the oil-importing developing countries. The remittances from these workers in turn eased the problem of the labourexporting countries in adjusting to the increased cost of oil imports. Thus, both borrowing from private capital markets and export of labour became very important elements in cushioning the oil shock for a number of countries. The post-OPEC movements of labour and financial capital, while dramatic, are only the more recent instances of a phenomenon of much greater antiquity. The seventeenth and eighteenth centuries saw vast migration of people out of Europe, though these movements were the result of conquests and colonization rather than movements from one sovereign state into another. But the nineteenth century, particularly the latter half, saw migration of the latter kind from Europe to countries of North and South America, as well as capital investment by residents of Europe in these