Michael J. Hiscox, “Inter-Industry Factor Mobility and the Politics of Trade,” International Organization, 55, 1 (Winter 2001), pp. 1-46.
Hiscox uses the standard economic theory of trade to highlight the importance of inter-industry factor mobility. For owners of factors of production (land, labor, and capital) that can move between industries in the domestic economy, the income effects of trade and divide individuals along class lines, setting owners of different factors at odds with each other regardless of the industry in which they are employed. When the factors are immobile between industries, the effects of trade divide individuals along industry lines, setting owners of the same factor in different industries (labor in the steel and aircraft industries, for example) at odds with each other over policy.
He relies on the measurements of the difference between rates of return for factors employed in different industries. If a factor is highly mobile, rate-of-return differentials should be arbitraged away by factor movement; smaller differentials indicate higher mobility.
Technological innovations and regulations profoundly affect inter-industry factor mobility and that is reflected in the changes in wage differentials within countries over time. Initially,the rise of machine-manufacturing created demand for unskilled workers who could shift between manufacturing industries and the lifing of legal restrictions on factor movement and deregulation lowered the costs of factor movement. Recent trends with a growing emphasis on specialized human capital has been increasing the importance place on specialized physical capital and knowledge and, thus, increased wage differentials.
In terms of mapping class preferences over trade, classes that own scarce resources should promote a protectionist platform while classes that own abundant factors should promote a free-trade platform. At low levels of mobility, Ricardo-Viner effects tie factor returns more closely to the fortunes of each industry, giving labor unions and management associations an incentive to lobby for trade policies that will confer rents by either limiting import competition or boosting exports. At high levels of mobility, industry rents are eliminated, and Stolper-Samuelson effects mean that any benefit tobe had from lobbying will be dispersed among all other owners of the same factor.
