Partially mobile capital. A general approach to two-sector trade theory

This paper develops a general approach to factor mobility in two-sector, general equilibrium models. Capital is partially mobile if reallocation involves the movement of physical capital goods that are at a comparative disadvantage in supplying efficiency units to the expanding sector, relative to units previously installed there. The Hecksher-Ohlin-Samuelson model and the sector-specific-capital model are special cases of this more general model. The degree of capital mobility, which is measured by the percentage loss in efficiency that is incurred in transferring the marginal unit of capital, is shown to be an important determinant of the response of factor prices and industry outputs to changes in commodity prices and factor endowments.