Notes on factor price equality and biased technical change in a two-cone trade model

Daniel Becker and Erich Gundlach

No 68, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics

Abstract: We reconsider the effects of long-run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that economic growth encourages less factor price diversity across cones.

Keywords: Factor Price Equalization; Cones of Diversification; Trade; Technical Change; Growth (search for similar items in EconPapers)
JEL-codes: F11 O1 O40 (search for similar items in EconPapers)
Date: 2006
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Working Paper: Notes on factor price equality and biased technical change in a two-cone trade model (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:roswps:68

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