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A DUAL DEFINITION FOR THE FACTOR CONTENT OF TRADE AND ITS EFFECT ON FACTOR REWARDS IN US MANUFACTURING SECTOR

Authors

  • AGELOS DELIS,

    1. Delis: Lecturer, Department of Economics, University of Cyprus, Nicosia, P.O. Box 20537, CY 1678, Cyprus; Leverhulme Centre for Research on Globalisation and Economic Policy, University of Nottingham, UK. Phone 0035722893682, Fax 0035722895028, E-mail delis.agelos@ucy.ac.cy
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  • THEOFANIS P. MAMUNEAS

    1. Mamuneas: Professor, Department of Economics, University of Cyprus, Nicosia, P.O. Box 20537, CY 1678, Cyprus. Phone 0035722893705, Fax 0035722895028, E-mail tmamuneas@ucy.ac.cy
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    • We would like to thank the editor and two anonymous reviewers for helpful comments and suggestions.


Abstract

We introduce a dual definition of the Factor Content of Trade (FCT) using the concept of the Equivalent Autarky Equilibrium. Estimating a symmetric normalized quadratic revenue function for the U.S. manufacturing sector between 1965 and 1991, we find that the FCT for capital is positive, while the FCT for skilled and unskilled labor is negative, suggesting that the Leontief Paradox is not present. Then the growth rate of the factor rewards is decomposed to the FCT, endowments, and technological change effects. We find that technological change is the most important determinant in explaining wage inequality between skilled and unskilled labor. (JEL F11, F16, J31)

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