Stolper–Samuelson Theorem

The theorem

In "Protection and Real Wages" (1941), Wolfgang Stolper and Paul Samuelson asked whether a tariff could raise workers' real wages. Assuming two goods and two factors (say labor and capital), perfect competition, constant returns to scale and production of both goods, as in the Heckscher–Ohlin model, a rise in the relative price of the labor-intensive good raises the wage by a larger proportion than the price and lowers the return to capital absolutely. Workers are therefore better off measured in any good, and capital owners worse off. Ronald Jones (1965) formalized this as the magnification effect: the proportional price change is bracketed by the proportional changes in factor returns. The conclusion that a tariff on labor-intensive imports raises real wages in a labor-scarce country placed an important qualification on the idea that free trade benefits everyone.

The political economy of trade

Combined with the Heckscher–Ohlin theorem, the result implies that opening to trade benefits owners of a country's abundant factor and hurts owners of its scarce factor. In rich countries abundant in skilled labor and capital, openness may lower the real wages of unskilled workers. Ronald Rogowski (1989) applied this to politics, arguing that expanding trade produces class coalitions in which abundant-factor groups back free trade and scarce-factor groups back protection. If factors cannot move between industries in the short run, however, industry-specific interests dominate, as in the specific-factors model. Jones and Scheinkman (1977) also showed that with many goods and factors the sharp conclusions of the theorem weaken.

The empirical debate

As the US skilled-unskilled wage gap widened in the 1980s and 1990s, economists debated whether trade or technology was responsible. Lawrence and Slaughter (1993) argued that the Stolper–Samuelson channel requires a fall in the relative price of unskilled-intensive goods, for which evidence was weak, and leaned toward technology. Adrian Wood (1994) argued that North–South trade mattered more. Krugman (2008) reassessed trade's role upward as trade with China grew, and the "China shock" research of Autor, Dorn and Hanson (2013) showed large employment and wage losses in regions exposed to import competition. In many developing countries the skill premium rose after liberalization, contrary to simple predictions (Goldberg and Pavcnik, 2007). The theorem nonetheless remains the starting point for analyzing trade's distributional effects and adjustment-assistance policy.

FAQ

What is the Stolper–Samuelson theorem in simple terms?

If the price of a product rises, people who own the input used heavily to make it, such as labor, become truly richer, while owners of the other input become poorer.

Why does trade create winners and losers?

Trade changes relative goods prices, and by the theorem owners of the abundant factor gain while owners of the scarce factor lose.

Sources reviewed: 2026-10-26

References

1. Stolper, W. F., & Samuelson, P. A. (1941). Protection and real wages. Review of Economic Studies, 9(1), 58–73.
2. Samuelson, P. A. (1948). International trade and the equalisation of factor prices. Economic Journal, 58(230), 163–184.
3. Jones, R. W. (1965). The structure of simple general equilibrium models. Journal of Political Economy, 73(6), 557–572.
4. Jones, R. W., & Scheinkman, J. A. (1977). The relevance of the two-sector production model in trade theory. Journal of Political Economy, 85(5), 909–935.
5. Deardorff, A. V., & Stern, R. M. (Eds.). (1994). The Stolper-Samuelson Theorem: A Golden Jubilee. Ann Arbor: University of Michigan Press.
6. Rogowski, R. (1989). Commerce and Coalitions. Princeton: Princeton University Press.
7. Wood, A. (1994). North-South Trade, Employment and Inequality. Oxford: Clarendon Press.
8. Lawrence, R. Z., & Slaughter, M. J. (1993). International trade and American wages in the 1980s. Brookings Papers on Economic Activity: Microeconomics, 1993(2), 161–226.
9. Krugman, P. (2008). Trade and wages, reconsidered. Brookings Papers on Economic Activity, 2008(1), 103–154.
10. Autor, D. H., Dorn, D., & Hanson, G. H. (2013). The China syndrome. American Economic Review, 103(6), 2121–2168.
11. Goldberg, P. K., & Pavcnik, N. (2007). Distributional effects of globalization in developing countries. Journal of Economic Literature, 45(1), 39–82.
12. Feenstra, R. C. (2016). Advanced International Trade: Theory and Evidence (2nd ed.). Princeton: Princeton University Press.
13. Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Economics: Theory and Policy (11th ed.). Boston: Pearson.