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The Sufficiency of the "Lens Conditions" for Factor Price Equalization in the Case of Two Factors

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  • Xiang, C.

Abstract

Factor price equalization (FPE) is a central theme in trade theory, for which Dixit and Norman (1980) establish the necessary and sufficient condition (the FPE condition). Deardorff (1994) provides a more intuitive condition (the lens condition) and establishes its necessity in general, as well as its sufficiency for the case of 2 countries. In this paper, I prove that the lens condition is sufficient for FPE in the case of 2 factors. This theorem has implications for empirical work.

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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 434.

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Length: 16 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:mie:wpaper:434

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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Keywords: TRADE POLICY ; PRICES;

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References

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  1. Demiroglu, Ufuk & Koo Yun, Kwan, 1999. "The lens condition for factor price equalization," Journal of International Economics, Elsevier, vol. 47(2), pages 449-456, April.
  2. Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.
  3. 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.
  4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  5. Blackorby, Charles & Schworm, William & Venables, Anthony, 1993. "Necessary and Sufficient Conditions for Factor Price Equalization," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 413-34, April.
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Cited by:
  1. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2005. "A Note on the Empirical Implementation of the Lens Condition," NBER Working Papers 11448, National Bureau of Economic Research, Inc.
  2. Kwan Koo Yun & Siu-kee Wong, 2001. "The Lens Condition with Two Factors," Discussion Papers 01-08, University at Albany, SUNY, Department of Economics.
  3. Brakman, Steven & van Marrewijk, Charles, 2013. "Lumpy countries, urbanization, and trade," Journal of International Economics, Elsevier, vol. 89(1), pages 252-261.
  4. Ju, Jiandong & Wei, Shang-Jin, 2006. "A Solution to Two Paradoxes of International Capital Flows," CEPR Discussion Papers 5981, C.E.P.R. Discussion Papers.
  5. Daniel Becker & Erich Gundlach, 2006. "Notes on Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model," Kiel Working Papers 1300, Kiel Institute for the World Economy.

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