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Necessary and sufficient conditions for factor price equalization

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  • BLACKORBY, Ch.
  • SCHWORM, W.
  • VENABLES, A.

Abstract

Although models with factor price equalization are used frequently in both theoretical and applied research in international economics, only sufficient conditions for factor price equalization have been presented in the literature. In this paper, we present necessary and sufficient conditions for FPE under quite general assumptions about the technologies of different countries. The necessary and sufficient conditions we derive are consistent with joint production, decreasing returns to scale, and substantive differences in the technologies and endowments of different countries. Our results enable us to reconcile the classical approach and the integrated equilibrium approach to factor price equalization.
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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).
  • Handle: RePEc:cor:louvco:1986047
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    Cited by:

    1. Shogren, Jason & Margolis, Michael, 2002. "Unprotected Resources and Voracious World Markets," Discussion Papers dp-02-30, Resources For the Future.
    2. van der Ploeg, Frederick & Venables, Anthony J., 2013. "Absorbing a windfall of foreign exchange: Dutch disease dynamics," Journal of Development Economics, Elsevier, vol. 103(C), pages 229-243.
    3. Gordon H. Hanson & Matthew J. Slaughter, 1999. "The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States," NBER Working Papers 7074, National Bureau of Economic Research, Inc.
    4. Rod Falvey & Udo Kreickemeier, 2017. "Globalization and Factor Returns in Competitive Markets," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 1, pages 3-25 World Scientific Publishing Co. Pte. Ltd..
    5. Andreas Pfingsten & Reiner Wolff, 2009. "Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs," Finnish Economic Papers, Finnish Economic Association, vol. 22(1), pages 9-20, Spring.
    6. Falvey, Rod, 1999. "Trade liberalization and factor price convergence," Journal of International Economics, Elsevier, vol. 49(1), pages 195-210, October.
    7. Xiang, Chong, 2001. "The sufficiency of the 'lens condition' for factor price equalization in the case of two factors," Journal of International Economics, Elsevier, pages 463-474.
    8. Kurose, Kazuhiro & Yoshihara, Naoki, 2016. "The Heckscher-Ohlin-Samuelson Model and the Cambridge Capital Controversies," UMASS Amherst Economics Working Papers 2016-05, University of Massachusetts Amherst, Department of Economics.

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