The possibility of factor price equalization, revisited

Alan Deardorff

Chapter 15 in Comparative Advantage, Growth, and the Gains from Trade and Globalization:A Festschrift in Honor of Alan V Deardorff, 2011, pp 155-163 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis paper derives a condition for factor price equalization (FPE) in a Heckscher–Ohlin model with many goods, factors, and countries. Using Dixit and Norman's integrated world economy (IWE), two sets, called lenses, are constructed: one spanned by the factor vectors used to produce goods in the IWE; the other spanned by the countries' factor endowments. If the factor-endowment lens ever passes outside the factor-use lens, then FPE is impossible. In this sense, therefore, FPE requires that factor endowments vary less across countries than factor intensities vary across industries.

Keywords: Comparative Advantage; Trade And Growth; Globalization; Computational Modeling; Trade Policy Analysis (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: The possibility of factor price equalization, revisited (1994)
Working Paper: The Possibility of Factor Price Equalization, Revisited (1991)
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