Posted by Connie R. Aponte on April 17, 2014 in RESULTS OF PRODUCT-PRICE STUDIES |

Finally, I synthesize the findings of these nine studies and draw two main conclusions. The first conclusion is that this literature has refined a set empirical strategies for applying the SS theorem to the data from which important methodological lessons can be learned. To preview some of the main results, “the facts” about product prices are relatively sensitive to the selection and weighting of industries sampled and to the decade considered. In contrast, “the facts” are relatively insensitive to the extent of data aggregation and the measurement of skills.

The second main conclusion is that despite the methodological progress that has been made, research to date still has fundamental limitations regarding the key question of how much international trade has contributed to rising wage inequality. Most importantly, more work needs to link the various exogenous forces attributable to international trade to actual product-price changes. Stated alternatively, the literature to date has made substantial progress understanding how to relate a given change in relative product prices to changes in relative factor prices. But it has made less progress understanding whether these product-price changes have anything to do with international trade. Two other important areas needing further work are the need to explore how slowly the Heckscher-Ohlin clock ticks and the need to complement product-price data with other data that might overcome potential limits of the product-price data. financial services

The rest of the paper is organized as follows. Section 2 presents the theoretical framework for understanding the product-price studies. Section 3 surveys each of the nine studies cited above. Section 4 synthesizes these studies and highlights the overall methodological progress. Section 5 discusses the limitations of these studies. Section 6 concludes.

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