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A Note on the Empirical Implementation of the Lens Condition

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  • Andrew B. Bernard
  • Raymond Robertson
  • Peter K. Schott

Abstract

Deardorff [Journal of International Economics 36 (1994) 167-175] offers an intuitively appealing test for factor price equality (FPE). He demonstrates that FPE is impossible if the set (i.e., lens) of points defined by regional factor abundance vectors does not lie within the set of points defined by goods' input intensities. This note demonstrates that empirical implementation of the lens condition is problematic if the "true" number of either goods or regions is unknown. We show that satisfaction of the lens condition is more likely when goods are relatively disaggregate compared to regions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11448.

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Date of creation: Jul 2005
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Handle: RePEc:nbr:nberwo:11448

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  1. 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.
  2. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
  3. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  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. 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.
  6. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  7. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
  8. Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.
  9. Siu-kee Wong & Kwan Koo Yun, 2003. "The Lens Condition with Two Factors," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 692-696, 09.
  10. Xiang, C., 1999. "The Sufficiency of the "Lens Conditions" for Factor Price Equalization in the Case of Two Factors," Working Papers 434, Research Seminar in International Economics, University of Michigan.
  11. Demiroglu, U. & Yun, K.K., 1997. "The Lens Conditions for factor Price Equalization," Working Papers 404, Research Seminar in International Economics, University of Michigan.
  12. Kwan Koo Yun, 2003. "Similarity of endowments and the factor price equalization condition," Economic Theory, Springer, vol. 21(2), pages 605-612, 03.
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Cited by:
  1. Kiyota, Kozo, 2012. "A many-cone world?," Journal of International Economics, Elsevier, vol. 86(2), pages 345-354.
  2. 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.
  3. Steven Brakman & Charles van Marrewijk, 2011. "Lumpy Countries, Urbanization, and Trade," CESifo Working Paper Series 3669, CESifo Group Munich.

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