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On The Likelihood Of Factor Price Equalization With Nontraded Goods

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  • DEARDORFF, A.V.
  • COURANT, P.N.

Abstract

It is argued that nontraded goods reduce the likelihood of factor price equalization. Specifically, the addition of nontraded goods to a small, open-economy Heckscher-Ohlin model with any number of goods reduces the size of the cone of diversification by the fraction of income spent on nontraded goods. This in turn may be regarded as reducing by a comparable amount the likelihood that a country's factor endowments will lie within that cone and, thus, the likelihood of factor price equalization. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Suggested Citation

  • Deardorff, A.V. & Courant, P.N., 1989. "On The Likelihood Of Factor Price Equalization With Nontraded Goods," Working Papers 241, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:241
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    Cited by:

    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2215-2288 is not listed on IDEAS
    2. Jaeok Park, 2015. "Cultural Barriers in International Trade and the," Korean Economic Review, Korean Economic Association, vol. 31, pages 267-300.
    3. Glenn Rayp, 1998. "An empirical test of the Dixit-Norman approach to factor price equalization, using cointegration techniques," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(3), pages 484-512, September.
    4. Choi, Yoonho & Jin, Hailong & Choi, E. Kwan, 2018. "Why are nontraded goods cheaper in poor countries?," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 210-219.
    5. James E. Anderson & Will Martin, 2011. "Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 289-309, April.
    6. Peter Debaere & Ufuk Demiroglu, 2003. "Factor Accumulation Without Diminishing Returns: The Case of East Asia: Technical Paper 2003-11," Working Papers 15113, Congressional Budget Office.
    7. Adrian Wood (ODID), "undated". "A more general Heckscher-Ohlin model," QEH Working Papers qehwps185, Queen Elizabeth House, University of Oxford.
    8. Galiani Sebastian & Heymann Daniel & Magud Nicolas E., 2017. "Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods," Journal of Globalization and Development, De Gruyter, vol. 8(1), pages 1-20, June.

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