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Notes on Factor Price Equality and Biased Technological Change in a Two-Cone Trade Model

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  • Daniel Becker
  • Erich Gundlach

Abstract

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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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_006.

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Length: 20 pages JEL Classification:
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_006

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  1. Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September.
  2. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
  3. Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.
  4. Deardorff, A.V., 1998. "Does Growth Encourage Factor Price Equalization?," Working Papers 431, Research Seminar in International Economics, University of Michigan.
  5. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
  6. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
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