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Factor Price Equality and Biased Technical Change in a Two‐Cone Trade Model

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  • Daniel Becker
  • Erich Gundlach

Abstract

We reconsider the effects of long‐run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that economic growth encourages less factor price diversity across cones.

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  • Daniel Becker & Erich Gundlach, 2007. "Factor Price Equality and Biased Technical Change in a Two‐Cone Trade Model," Review of Development Economics, Wiley Blackwell, vol. 11(4), pages 685-698, November.
    • Handle: RePEc:bla:rdevec:v:11:y:2007:i:4:p:685-698
    DOI: 10.1111/j.1467-9361.2007.00421.x
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    Cited by:

    1. Gundlach, Erich & de Vaal, Albert, 2008. "Technological change, trade, and endogenous factor endowments," Kiel Working Papers 1471, Kiel Institute for the World Economy (IfW Kiel).
    2. Gundlach, Erich, 2007. "Arbeitssparender technischer Fortschritt und Löhne," Kiel Working Papers 1382, Kiel Institute for the World Economy (IfW Kiel).

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