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Computational investigation of the feasibility of factor price equalization

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  • Kazuyuki Nakamura

Abstract

We propose an empirical procedure for verifying the factor price equalization (FPE) condition. The FPE condition defined by Deardorff (J Int Econ 36:167–175, 1994 ) is converted to a standard linear programming problem. Although the procedure does not provide a graphical representation, it can be applied for any number of primary factors of production. In addition, based on the solution vector of the linear programming problem, we can find what quantities of the primary factors of production should be reallocated between which regions to satisfy the FPE condition when the condition does not hold. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Kazuyuki Nakamura, 2015. "Computational investigation of the feasibility of factor price equalization," Letters in Spatial and Resource Sciences, Springer, vol. 8(2), pages 101-108, July.
    • Handle: RePEc:spr:lsprsc:v:8:y:2015:i:2:p:101-108
    DOI: 10.1007/s12076-014-0115-1
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    References listed on IDEAS

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    1. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 937-950, November.
    2. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
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    6. 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.
    7. Debaere, Peter, 2004. "Does lumpiness matter in an open economy?: Studying international economics with regional data," Journal of International Economics, Elsevier, vol. 64(2), pages 485-501, December.
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    9. Ling Qi, 2003. "Conditions for Factor Price Equalization in the Integrated World Economy Model," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 899-908, November.
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    More about this item

    Keywords

    Factor price equalization; Lens condition; Linear programming; F11; F15; R12;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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