World Resources Determine World Prices

Baoping Guo

MPRA Paper from University Library of Munich, Germany

Abstract: This paper derived a general equilibrium of the Heckscher-Ohlin model for the context of two-factor, multiple-commodity, and multiple-country (2 x N x M model). The equalized factor price (PFE) and world commodity price at the equilibrium are just the prices Dixit and Norman predicted, that the prices from equilibriums remains the same when the allocation of factor endowments changes within (the 2 x N x M) IWE box. The study shows how price-trade equilibriums reached for multiple countries and how world prices was determined. The equilibrium and world price structure shows that world (factor endowments) resources determine the world price. This is another core understanding of international trade.

Keywords: IWE; Factor price equalization; Heckscher-Ohlin; Equilibrium price; equalized factor price; Dixit-Norman (search for similar items in EconPapers)
JEL-codes: F1 F10 F14 F15 (search for similar items in EconPapers)
Date: 2017-11, Revised 2018-12-13
New Economics Papers: this item is included in nep-int
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