What are the strengths & weaknesses of the Stolper -Samuelson Theorem?

Answer 1

Well, it is basic trade theory. It makes an assumption that there are relative rewards factors...



The Stolper-Samuelson theorem is a basic theorem in trade theory. It describes a relation between the relative prices of output goods and relative factor rewards, specifically, real wages and real returns to capital.

The theorem states that — under some economic assumptions (constant returns, perfect competition) — a rise in the relative price of a good will lead to a rise in the return to that factor which is used most intensively in the production of the good, and conversely, to a fall in the return to the other factor.