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A Note on the Empirical Implementation of the Lens Condition

  • Andrew B. Bernard
  • Raymond Robertson
  • Peter K. Schott

Deardorff [Journal of International Economics 36 (1994) 167-175] offers an intuitively appealing test for factor price equality (FPE). He demonstrates that FPE is impossible if the set (i.e., lens) of points defined by regional factor abundance vectors does not lie within the set of points defined by goods' input intensities. This note demonstrates that empirical implementation of the lens condition is problematic if the "true" number of either goods or regions is unknown. We show that satisfaction of the lens condition is more likely when goods are relatively disaggregate compared to regions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11448.

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Date of creation: Jul 2005
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Handle: RePEc:nbr:nberwo:11448
Note: ITI
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  1. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
  2. Kwan Koo Yun, 2003. "Similarity of endowments and the factor price equalization condition," Economic Theory, Springer, vol. 21(2), pages 605-612, 03.
  3. 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.
  4. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  5. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
  6. Demiroglu, Ufuk & Koo Yun, Kwan, 1999. "The lens condition for factor price equalization," Journal of International Economics, Elsevier, vol. 47(2), pages 449-456, April.
  7. 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.
  8. Siu-kee Wong & Kwan Koo Yun, 2003. "The Lens Condition with Two Factors," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 692-696, 09.
  9. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
  10. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  11. Ling Qi, 2003. "Conditions for Factor Price Equalization in the Integrated World Economy Model," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 899-908, November.
  12. Debaere, Peter, 2004. "Does lumpiness matter in an open economy?: Studying international economics with regional data," Journal of International Economics, Elsevier, vol. 64(2), pages 485-501, December.
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