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Necessary and Sufficient Conditions for Factor Price Equalization

Author

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  • Charles Blackorby
  • William Schworm
  • Anthony Venables

Abstract

Although models with factor price equalization are used frequently in both theoretical and applied research in international economics, only sufficient conditions for factor price equalization have been presented in the literature. In this paper, we present necessary and sufficient conditions for FPE under quite general assumptions about the technologies of different countries. The necessary and sufficient conditions we derive are consistent with joint production, decreasing returns to scale, and substantive differences in the technologies and endowments of different countries. Our results enable us to reconcile the classical approach and the integrated equilibrium approach to factor price equalization.

Suggested Citation

  • Charles Blackorby & William Schworm & Anthony Venables, 1993. "Necessary and Sufficient Conditions for Factor Price Equalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(2), pages 413-434.
    • Handle: RePEc:oup:restud:v:60:y:1993:i:2:p:413-434.
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    File URL: http://hdl.handle.net/10.2307/2298065
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    Cited by:

    1. Shogren, Jason & Margolis, Michael, 2002. "Unprotected Resources and Voracious World Markets," RFF Working Paper Series dp-02-30, Resources for the Future.
    2. van der Ploeg, Frederick & Venables, Anthony J., 2013. "Absorbing a windfall of foreign exchange: Dutch disease dynamics," Journal of Development Economics, Elsevier, vol. 103(C), pages 229-243.
    3. Kazuhiro Kurose & Naoki Yoshihara, 2016. "The Heckscher-Ohlin-Samuelson Model and the Cambridge Capital Controversies," DSSR Discussion Papers 58, Graduate School of Economics and Management, Tohoku University.
    4. Kazuhiro Kurose & Naoki Yoshihara, 2018. "The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem," Working Papers SDES-2018-17, Kochi University of Technology, School of Economics and Management, revised Nov 2018.
    5. Hanson, Gordon H. & Slaughter, Matthew J., 2002. "Labor-market adjustment in open economies: Evidence from US states," Journal of International Economics, Elsevier, vol. 57(1), pages 3-29, June.
    6. Andreas Pfingsten & Reiner Wolff, 2009. "Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs," Finnish Economic Papers, Finnish Economic Association, vol. 22(1), pages 9-20, Spring.
    7. Xiang, Chong, 2001. "The sufficiency of the 'lens condition' for factor price equalization in the case of two factors," Journal of International Economics, Elsevier, vol. 53(2), pages 463-474, April.
    8. Falvey, Rod, 1999. "Trade liberalization and factor price convergence," Journal of International Economics, Elsevier, vol. 49(1), pages 195-210, October.
    9. Gordon H. Hanson & Matthew J. Slaughter, 1999. "The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States," NBER Working Papers 7074, National Bureau of Economic Research, Inc.
    10. Rod Falvey & Udo Kreickemeier, 2017. "Globalization and Factor Returns in Competitive Markets," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 1, pages 3-25, World Scientific Publishing Co. Pte. Ltd..
    11. Kurose, Kazuhiro & Yoshihara, Naoki, 2018. "The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem," Discussion Paper Series 686, Institute of Economic Research, Hitotsubashi University.

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