The sufficiency of the 'lens condition' for factor price equalization in the case of two factors
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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404, Research Seminar in International Economics, University of Michigan.
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