Notes on Factor Price Equality and Biased Technological Change in a Two-Cone Trade Model
Daniel Becker () and
Erich Gundlach ()
DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade
We reconsider the effects of long run growth on relative factor prices across cones of specialization. We model economic growth as exogenous technological change. Allowing for capital biased technological change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones, depending on the size of the specific bias of technological change and on the specification of preferences. For a specific set of assumptions, we show that economic growth may encourage factor price equality across cones.
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