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The Tendency towards Factor Price Equalization among OECD Countries

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  • Mokhtari, Manouchehr
  • Rassekh, Farhad

Abstract

The authors conduct tests to gain insight into the empirical relevance of the proposition that factor prices converge as trade expands. The test results support the proposition of factor price convergence in sixteen OECD countries during the 1961-84 period. Regression analyses support the view that trade openness has been the most significant factor influencing wage variations. This paper also distinguishes between "high wage" and "low wage" countries. Pooled ordinary least squares estimates indicate that Canada, the United States, Denmark, West Germany, the Netherlands, and Sweden are "high wage" and Japan, New Zealand, Austria, Belgium, Finland, France, Ireland, Norway, Switzerland, and the United Kingdom are "low wage" countries. Further results using the Within estimations technique are provided. Copyright 1989 by MIT Press.

Suggested Citation

  • Mokhtari, Manouchehr & Rassekh, Farhad, 1989. "The Tendency towards Factor Price Equalization among OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 636-642, November.
  • Handle: RePEc:tpr:restat:v:71:y:1989:i:4:p:636-42
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    1. repec:eee:reveco:v:51:y:2017:i:c:p:535-544 is not listed on IDEAS
    2. Steven Globerman & W.R. Singleton, 2009. "Harmonisation of voluntary disclosure practices by Japanese companies," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, pages 335-355.
    3. Rassekh, Farhad, 2010. "Is Stolper-Samuelson dangerous and FPE a failure?," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 555-561, October.
    4. Glenn Rayp, 1998. "An empirical test of the Dixit-Norman approach to factor price equalization, using cointegration techniques," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 484-512.
    5. Slaughter, Matthew J., 2001. "Trade liberalization and per capita income convergence: a difference-in-differences analysis," Journal of International Economics, Elsevier, pages 203-228.
    6. Bruce Elmslie & William Milberg, 1992. "International trade and factor intensity uniformity: An empirical assessment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 464-486.
      • Hans Gottinger & Hans Glismann & Gerd-R. Steffen & Peter Trapp & Paulgeorg Juhl & Harmen Lehment & Torsten Tewes & Thomas Mayer & Hans-Georg Petersen & Paulgeorg Juhl & Rolf Langhammer, 1980. "Rezensionen," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 380-403.
    7. Kim, Hyeongwoo & Thompson, Henry, 2014. "Wages in a factor proportions model with energy input," Economic Modelling, Elsevier, vol. 36(C), pages 495-501.
    8. Joanna Alexopoulos & Tiago V. Cavalcanti, 2010. "Cheap home goods and persistent inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 417-451.
    9. Zoltán J. Ács & Pontus Braunerhjelm & David B. Audretsch & Bo Carlsson, 2015. "The knowledge spillover theory of entrepreneurship," Chapters,in: Global Entrepreneurship, Institutions and Incentives, chapter 7, pages 129-144 Edward Elgar Publishing.
    10. Kim, Hyeongwoo & Thompson, Henry, 2009. "Factor Proportions Wages in a Structural Vector Autoregression," MPRA Paper 17798, University Library of Munich, Germany.
    11. Ahmed Nawaz Hakro & Bashir Ahmad Fida, 2009. "Trade and Income Convergence in Selected South Asian Countries and Their Trading Partners," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, pages 49-70.
    12. Todd Burgman & John Geppert, 1993. "Factor price equalization: a cointegration approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 472-487.
    13. Farhad Rassekh, 1993. "International trade and the relative dispersion of industrial wages and production techniques in 14 OECD countries, 1970–1985," Open Economies Review, Springer, pages 325-344.
    14. Joanna Alexopoulos & Tiago V. Cavalcanti, 2010. "Cheap home goods and persistent inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 417-451.

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