ABSTRACT
The theory of international trade is traditionally divided into two branches: pure and monetary. The former analyses issues of international economics which abstract from Keynesian problems of determining the price level and employment. This pure or real theory of international trade is generally cast in terms of simple general equilibrium models, especially the so-called two-by-two-by-two version of the HeckscherOhlin model. Traditionally trade theorists have been interested in the consequences of two different but not mutually exclusive types of factor market imperfections, namely factor price differentials and minimum real wage rates. Distortionary factor price differentials involve the non-uniform payment to an identical factor in different sectors of the economy. In other words, the factor price differential cannot be attributed to legitimate economic grounds such as disutility in occupations. One is interested in looking for a definition that starts earlier in the process, one that identifies the economic phenomenon leading to the postulated violation of the optimality condition.
