Essays on growth, international trade and factor price equalization

Chapter one investigates the importance of large foreign markets in export-led development strategies and analyzes how large foreign markets can help a less developed country (LDC) break a poverty trap that it may have fallen into. Chapter two explores the implications of factor proportions theory for international capital mobility. Chapter three analyzes the theoretical conditions for factor price equalization in an economy with many countries and sectors. Chapter four investigates empirically whether or not conditions for factor price equalization hold for different groups of countries.; I. A dynamic optimizing general equilibrium model is presented where the crucial benefit of trade is the access it provides to large foreign markets. A LDC with an economy that employs less productive technologies is transformed into a modern and more efficient one with the help of trade. In the absence of trade, a minimum efficient scale requirement and the limited size of its domestic market prevents the LDC from adopting available better technologies.; II. A puzzle in international finance introduced by Feldstein-Horioka is that only insignificant shares of national savings of major OECD countries flow across national borders. It is shown that the mechanism underlying the well known Rybczynski Theorem of international trade theory can keep rental rates of capital from failing in countries that have high rates of capital accumulation.; III. In an attempt to obtain a general condition for factor price equalization that can be used in a setting with multiple factors (as well as multiple countries and sectors), it is shown that the lens condition is sufficient if the number of factors is larger than the number of goods, but is not sufficient otherwise, as there exists a counterexample.; IV. Using the theory of lenses and two different data sets containing international data on sectoral employment and capital stocks, it is found that factor proportions of developed countries are indeed sufficiently similar to permit factor price equalization. In contrast, there is no evidence in favor of similarity of the countries in a group that combines developed and developing countries.