International Trade and the Value of Time

I discuss a generalized Heckscher-Ohlin-Vanek (HOV) model in which consumption requires time as well as money (as in Becker's theory of the allocation of time) and the amount of work that a worker can do per unit of time-her "ability"-varies from country to country. High ability implies high income per hour, which implies a high value of time and, therefore, high consumption of the good that is more "time-saving." Therefore, if domestic production of this good is not commensurately high, it would have to be imported. In this way, I demonstrate that international differences in worker ability constitute an independent source of gains from trade. The model is able to explain several observed features of North-South trade that are not explained by the HOV model. The theoretical possibility of a Leontief paradox-type trade pattern is also demonstrated. Copyright Blackwell Publishing Ltd 2005.

Revenue enhancing tariff reform

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