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Notes on Factor Price Equality and Biased Technological Change in a Two-Cone Trade Model

  • Daniel Becker
  • Erich Gundlach

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.

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File URL: http://degit.sam.sdu.dk/papers/degit_10/C010_006.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_006.

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Length: 20 pages JEL Classification:
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_006
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  1. 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.
  2. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
  3. Deardorff, Alan V, 2001. "Does Growth Encourage Factor Price Equalization?," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 169-81, June.
  4. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
  5. Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September.
  6. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
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