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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- Deardorff, A.V., 1991.
"The Possibility of Factor Price Equalization, Revisited,"
277, Research Seminar in International Economics, University of Michigan.
- Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
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"An Account of Global Factor Trade,"
435, Research Seminar in International Economics, University of Michigan.
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- Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
- Demiroglu, Ufuk & Koo Yun, Kwan, 1999.
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- Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
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- BLACKORBY, Ch. & SCHWORM, W. & VENABLES, A., 1986. "Necessary and sufficient conditions for factor price equalization," CORE Discussion Papers 1986047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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