Notes on Factor Price Equality and Biased Technological Change in a Two-Cone Trade Model
We reconsider the effects of long run growth on relative factor prices across cones of specialization. We model economic growth as exogenous technological change. Allowing for capital biased technological change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones, depending on the size of the specific bias of technological change and on the specification of preferences. For a specific set of assumptions, we show that economic growth may encourage factor price equality across cones.
|Length:||20 pages JEL Classification:|
|Date of creation:||Jun 2005|
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- Donald R. Davis & David E. Weinstein, 2001.
"An Account of Global Factor Trade,"
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- Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
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- Deardorff, Alan V, 2001. "Does Growth Encourage Factor Price Equalization?," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 169-181, June.
- Deardorff, A.V., 1998. "Does Growth Encourage Factor Price Equalization?," Working Papers 431, Research Seminar in International Economics, University of Michigan.
- Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September.
- Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier. Full references (including those not matched with items on IDEAS)
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