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

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Author Info
Daniel Becker () (University of Rostock)
Erich Gundlach () (Kiel Institute for the World Economy)

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Abstract

We reconsider the effects of long-run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that eco-nomic growth encourages less factor price diversity across cones.

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File URL: http://www.wiwi.uni-rostock.de/fileadmin/Institute/VWL/VWL-Institut/RePEc/pdf/wp068thuenen.pdf
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File Function: revised, December 2006
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Publisher Info
Paper provided by University of Rostock, Institute of Economics, Germany in its series Thuenen-Series of Applied Economic Theory with number 68.

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Length: 22 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:ros:wpaper:68

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Related research
Keywords: Factor Price Equalization; Cones of Diversification; Trade; Technical Change; Growth;

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Deardorff, Alan V, 2001. "Does Growth Encourage Factor Price Equalization?," Review of Development Economics, Blackwell Publishing, vol. 5(2), pages 169-81, June. [Downloadable!] (restricted)
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  3. Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September. [Downloadable!] (restricted)
  4. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
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  6. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February. [Downloadable!] (restricted)
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  7. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03. [Downloadable!] (restricted)
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  8. 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. [Downloadable!] (restricted)
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