The Stolper-Samuelson Theorem in Models with Economies of Scale

The Stolper-Samuelson theorem is one of the most cited theorems in economics. On the occasion of its Fiftieth Anniversary in 1991, a Golden Jubilee volume was published, containing the original article, many well known extensions of it and another 12 new papers reflecting on aspects of the theorem (Deardorff and Stern, 1994). The continued popularity of the theorem derives from its key message: product price changes necessarily create conflict between households owning different factors. This proposition is the foundation of political economy models of tariffs and other taxes and government interventions. Such an important theorem provides a good opportunity to explore the robustness of propositions derived from a world in which there are no economies of scale when extended to models which recognize the existence of economies of scale. This chapter seeks to extend the theorem to such models.