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A Note on the Empirical Implementation of the Lens Condition

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

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:11448 Note: ITI
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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, vol. 59(1), pages 101-136, January.
    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. 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.
    4. 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.
    5. 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.
    6. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 647-678.
    7. 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.
    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, September.
    9. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
    10. 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.
    11. Kwan Koo Yun, 2003. "Similarity of endowments and the factor price equalization condition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 605-612, March.
    12. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
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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. Brakman, Steven & van Marrewijk, Charles, 2013. "Lumpy countries, urbanization, and trade," Journal of International Economics, Elsevier, vol. 89(1), pages 252-261.
    3. Kiyota, Kozo, 2012. "A many-cone world?," Journal of International Economics, Elsevier, vol. 86(2), pages 345-354.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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