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Assistant Professor, Department of Economics, Fordham University, Bronx, NY 10458. E-mail email@example.com. This paper was drafted while I was a visiting scholar in the Research Department of the International Monetary Fund. I thank Hamid Faruqee and Peter Isard for helpful comments. Any remaining errors are my own.
This is only true “to a lesser extent” due to the higher transactions costs generally involved in moving goods across countries versus moving capital across countries.
This is analogous to the result that there will be zero profits in perfect competition, as any positive (excess) profits attract unlimited entry and any negative profits cause exit.