Moving up the value chain?: The economic theory of factor price equalization and its implications for the translation profession

In this age of globalization, and as a result of the advent of information, communication and translation technologies, translation tasks tend to be outsourced or even crowd-sourced to countries with lower wages, and translation fees seem to be on a downward spiral. Downward pressure on translation rates appears to confirm the factor price equalization theorem, a key derivation of the Heckscher-Ohlin trade model in economics. This famous theorem in labor and international economics argues that the prices of factors of production such as wage rate (or return on human capital) are equalized across countries as a result of international trade activities. This paper begins by presenting the theoretical framework of the factor price equalization theorem. It then examines how this theorem can be applied to analyze certain recently observed phenomena in the market for professional services in general and in the translation market in particular, and discusses implications for professional translators, language service providers and translator training institutions.