ABSTRACT
Besides the markets for goods, the factor markets play a decisive role in the paradigm of the world economy. Equilibrium of the world economy also requires the factor markets to be in equilibrium. If this equilibrium is disturbed, the world economy has to adjust. The adjustment processes in the world factor markets are thus of great importance. The world labor market (section 3.1) and the world capital market (section 3.2) are discussed in particular. Important questions are whether national capital markets are segmented and how close is the relation between national investment and national savings (sections 3.3 and 3.4). Historically, some countries have developed from net debtors to net creditors. This is the debt cycle hypothesis (section 3.5). For a given production technology, the prices of the production factors are related to each other and a factor-price frontier exists (section 3.6). Finally, the world market for natural resources and disturbances on the factor markets are dealt with (sections 3.7 and 3.8).
3.1 The world market for labor
