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The Sufficiency of the "Lens Conditions" for Factor Price Equalization in the Case of Two Factors

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Abstract

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.

Suggested Citation

  • Xiang, C., 1999. "The Sufficiency of the "Lens Conditions" for Factor Price Equalization in the Case of Two Factors," Working Papers 434, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:434
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    References listed on IDEAS

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    1. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, pages 101-136.
    2. Charles Blackorby & William Schworm & Anthony Venables, 1993. "Necessary and Sufficient Conditions for Factor Price Equalization," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 413-434.
    3. Donald R. Davis & David E. Weinstein, 1998. "Market Access, Economic Geography, and Comparative Advantage: An Empirical Assessment," NBER Working Papers 6787, National Bureau of Economic Research, Inc.
    4. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, pages 167-175.
    5. Demiroglu, Ufuk & Koo Yun, Kwan, 1999. "The lens condition for factor price equalization," Journal of International Economics, Elsevier, pages 449-456.
    6. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, pages 167-175.
    7. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, pages 1423-1453.
    8. Demiroglu, Ufuk & Koo Yun, Kwan, 1999. "The lens condition for factor price equalization," Journal of International Economics, Elsevier, pages 449-456.
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    Cited by:

    1. Jiandong Ju & Shang-Jin Wei, 2006. "A Solution to Two Paradoxes of International Capital Flows," NBER Working Papers 12668, National Bureau of Economic Research, Inc.
    2. Becker, Daniel Thomas & Gundlach, Erich, 2006. "Notes on factor price equality and biased technical change in a two-cone trade model," Thuenen-Series of Applied Economic Theory 68, University of Rostock, Institute of Economics.
    3. Brakman, Steven & van Marrewijk, Charles, 2013. "Lumpy countries, urbanization, and trade," Journal of International Economics, Elsevier, pages 252-261.
    4. Kazuyuki Nakamura, 2015. "Computational investigation of the feasibility of factor price equalization," Letters in Spatial and Resource Sciences, Springer, pages 101-108.
    5. Kwan Koo Yun & Siu-kee Wong, 2001. "The Lens Condition with Two Factors," Discussion Papers 01-08, University at Albany, SUNY, Department of Economics.
    6. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, pages 101-136.
    7. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2005. "A Note on the Empirical Implementation of the Lens Condition," NBER Working Papers 11448, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    TRADE POLICY ; PRICES;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F10 - International Economics - - Trade - - - General

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