History[edit]

It was derived in 1941 from within the framework of the Heckscher–Ohlin model by Wolfgang Stolper and Paul Samuelson,[1] but has subsequently been derived in less restricted models. As a term, it is applied to all cases where the effect is seen. Ronald W. Jones and José Scheinkman show that under very general conditions the factor returns change with output prices as predicted by the theorem.[2] If considering the change in real returns under increased international trade a robust finding of the theorem is that returns to the scarce factor will go down, ceteris paribus. An additional robust corollary of the theorem is that a compensation to the scarce factor exists which will overcome this effect and make increased trade Pareto optimal.[3] The original Heckscher–Ohlin model was a two-factor model with a labor market specified by a single number. Therefore, the early versions of the theorem could make no predictions about the effect on the unskilled labor force in a high-income country under trade liberalization. However, more sophisticated models with multiple classes of worker productivity have been shown to produce the Stolper–Samuelson effect within each class of labor: Unskilled workers producing traded goods in a high-skill country will be worse off as international trade increases, because, relative to the world market in the good they produce, an unskilled first world production-line worker is a less abundant factor of production than capital.


The Stolper–Samuelson theorem is closely linked to the factor price equalization theorem, which states that, regardless of international factor mobility, factor prices will tend to equalize across countries that do not differ in technology.

Criticism[edit]

The validity of the Heckscher–Ohlin model has been questioned since the classical Leontief paradox. Indeed, Feenstra called the Heckscher–Ohlin model "hopelessly inadequate as an explanation for historical and modern trade patterns".[4] As for the Stolper–Samuelson theorem itself, Davis and Mishra recently stated, "It is time to declare Stolper–Samuelson dead".[5] They argue that the Stolper–Samuelson theorem is "dead" because following trade liberalization in some developing countries (particularly in Latin America), wage inequality rose, and, under the assumption that these countries are labor-abundant, the SS theorem predicts that wage inequality should have fallen. Aside from the declining trend in wage inequality in Latin America that has followed trade liberalization in the longer run (see Lopez-Calva and Lustig), an alternative view would be to recognize that technically the SS theorem predicts a relationship between output prices and relative wages.[6]


Papers that compare output prices with changes in relative wages find moderate-to-strong support for the Stolper–Samuelson theorem for Chile,[7] Mexico,[8] and Brazil.[9]

Wage insurance

Heckscher–Ohlin model

; Jones, Ronald W. (October 1985). "A simple production model with Stolper-Samuelson properties". International Economic Review. 26 (3): 565–567. doi:10.2307/2526703. JSTOR 2526703.

Marjit, Sugata

McCulloch, Rachel (2005). (PDF). Waltham, Massachusetts: Brandeis University.

Protection and real wages: the Stolper–Samuelson theorem