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This paper considers the appropriateness of using such quantitative measures as changes in the factor content of trade and the behavior of factor proportions within versus among industries to draw inferences about changes in relative factor prices. The conclusion reached is that only under special assumptions are such linkages justified. Using these special assumptions of Cobb-Douglas or CES production functions and preferences, a final section of the paper presents empirical estimates of how trade may have affected the U.S. wage gap between more educated and less educated workers in recent years.

Factor proportions. --- Human capital.

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It has been alleged that multinational firms fail to adapt their methods of production to take advantage of the abundance and low price of labor in less developed countries and therefore contribute to the unemployment problems of these countries. This paper asks two questions: do multi-national firms adapt to labor cost differences by using more labor-intensive methods of production in LDC's than in developed countries and do multinational firms' affiliates in LDC's use more capital-intensive methods than locally-owned firms? We concluded that both U.S.-based and Swedish-based firms do adapt to differences in labor cost, using the most capital-intensive methods of production at home and the least capital-intensive methods in low-wage countries. Among host countries, the higher the labor cost, the higher the capital intensity of production for manufacturing as a whole, within individual industries, and within individual companies. When we attempted to separate the capital-intensity differences into choice of technology and method of operation within a technology we found that firms appeared to choose capital-intensive technologies in LDC's but then responded to low wage levels there by substituting labor for capital within the technology. Similarly, U.S. affiliates appeared to use technologies similar to those of locally-owned firms but to operate in a more capital-intensive manner mainly because they faced higher labor costs.

Factor proportions. --- International business enterprises.

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Labor productivity --- Capital productivity --- Industrial management --- Factor proportions --- Case studies

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Economic development --- Factor proportions --- International economic relations --- Developing countries

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International economic relations --- Factor proportions. --- Globalization. --- Heckscher-Ohlin principle. --- Input-output analysis. --- International trade. --- Geografie --- Economische geografie --- Ontwikkeling. --- globalisation --- production --- mobilite --- facteurs de production --- politique economique --- cooperation economique --- region --- modeles economiques --- international --- International trade --- Globalization --- Input-output analysis --- Factor proportions --- Heckscher-Ohlin principle --- 382 --- Heckscher-Ohlin-Samuelson model --- Comparative advantage (International trade) --- Factor endowments --- Natural resources --- Interindustry economics --- Economics, Mathematical --- National income --- Input-output tables --- Global cities --- Globalisation --- Internationalization --- International relations --- Anti-globalization movement --- External trade --- Foreign commerce --- Foreign trade --- Global commerce --- Global trade --- Trade, International --- World trade --- Commerce --- Non-traded goods --- globalisering --- productie --- mobiliteit --- productiefactoren --- economisch beleid --- economische samenwerking --- gewest --- economische modellen --- internationaal --- Accounting