How Likely Is Factor Price Equalization?

Bodil O. Hansen and Hans Keiding
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Bodil O. Hansen: Copenhagen Business School
Hans Keiding: Department of Economics, University of Copenhagen

No 08-10, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The idea of treating factor price equalization as a situation, where the distribution of factors among countries is compatible with an equilibrium in an integrated world economy, has been refined to give the so-called lens condition for factor price equalization. In this paper, we show that the lens condition may be used to give estimates for the probability of factor price equalization when factors are distributed randomly among countries and, in addition, the techologies are sampled according to a given probability distribution. The estimates indicate that factor price equalization may occur less often than intuitively conceived.

Keywords: international trade; Factor Price Equalization; lens condition (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2008-04
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0810

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