Why the Lens Condition Cannot Imply Factor Price Equalization

Ling Qi

Review of International Economics, 2010, vol. 18, issue 4, 772-779

Abstract: This paper explains why the lens condition cannot imply the factor price equalization condition when the rank of the factor use matrix is larger than two, but smaller than the number of goods. This arises from production substitution and the degeneration of the convex polyhedrons consisting of the possible output vectors of a country where the factor market is cleared. Two kinds of necessary and sufficient conditions for the factor price equalization condition are given. As a byproduct, a simple proof is given on equivalence between the lens condition and the factor price equalization condition in the case where the rank of the factor use matrix is two.

Date: 2010
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