Equalized Factor Price and Integrated World Equilibrium

Baoping Guo

MPRA Paper from University Library of Munich, Germany

Abstract: This paper derives a general equilibrium of the Heckscher-Ohlin model. The equalized factor price at the equilibrium is just the price that Dixit and Norman (1980) described in their Integrated World Equilibrium (IWE), i.e. that equalized factor price and common commodity price remain the same when the allocation of factor endowments changes within the IWE box. This is the first analytical solution that presents an equalized factor price for the Heckscher-Ohlin model. The study demonstrates that giving an IWE box, there is only one equalized factor price with the property of the IWE price. The equilibrium solution is a joint statement of the Heckscher-Ohlin theorem and the factor-price equalization theorem.

Keywords: Factor content of trade; H-O model; trade; factor price equalization; Heckscher-Ohlin; General equilibrium of trade; Integrated World Equilibrium; IWE (search for similar items in EconPapers)
JEL-codes: A2 A23 F1 F10 F15 (search for similar items in EconPapers)
Date: 2015-10, Revised 2019-02
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https://mpra.ub.uni-muenchen.de/92051/1/MPRA_paper_92051.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/93591/4/MPRA_paper_93591.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/96816/1/MPRA_paper_96816.pdf revised version (application/pdf)

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