In this paper, the authors analyze the factors determining the pattern of trade between underemployed economies. They find, among other things, that a low-wage, land-abundant country exports the land-using, labor-intensive product to a high-wage, capital-abundant country. The authors also find...

This paper investigates optimal trade policies for a small open economy with unemployment. When factor prices are rigid, random foreign prices result in random unemployment of resources. The ranking of second-best policies is investigated. If the marginal propensity to consume the importable is...