The lens condition for factor price equalization
Deardorff (1994) provides a condition that is necessary for factor price equalization across countries. That condition is a generalization of "country endowments contained in the diversification cone" from the standard 2x2x2 Hecksher-Ohlin model to the case of many goods, countries and factors. He also shows that this condition is sufficient in the case of two countries, and conjectures that sufficiency might hold in general. In this paper we establish sufficiency in some further cases. However, we show by a counterexample that the sufficiency does not hold in general.
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- Deardorff, Alan V., 1994.
"The possibility of factor price equalization, revisited,"
Journal of International Economics,
Elsevier, vol. 36(1-2), pages 167-175, February.
- Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.