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The sufficiency of the 'lens condition' for factor price equalization in the case of two factors

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  • Xiang, Chong

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.
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  • Xiang, Chong, 2001. "The sufficiency of the 'lens condition' for factor price equalization in the case of two factors," Journal of International Economics, Elsevier, vol. 53(2), pages 463-474, April.
    • Handle: RePEc:eee:inecon:v:53:y:2001:i:2:p:463-474
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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. Charles Blackorby & William Schworm & Anthony Venables, 1993. "Necessary and Sufficient Conditions for Factor Price Equalization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(2), pages 413-434.
    3. 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.
    4. Alan V. Deardorff, 2011. "The possibility of factor price equalization, revisited," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 15, pages 155-163, World Scientific Publishing Co. Pte. Ltd..
    5. 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.
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    Cited by:

    1. Jiandong Ju & Shang-Jin Wei, 2014. "A Solution to Two Paradoxes of International Capital Flows," Economic and Political Studies, Taylor & Francis Journals, vol. 2(1), pages 3-43, January.
    2. Giovanni Facchini, 2004. "The political economy of international trade and factor mobility," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 1-32, February.
    3. Becker, Daniel Thomas & Gundlach, Erich, 2006. "Notes on factor price equality and biased technical change in a two-cone trade model," Kiel Working Papers 1300, Kiel Institute for the World Economy (IfW Kiel).
    4. Artal, Andrés & Castillo, Juana & Requena,Francisco, 2007. "La distribución factorial en las regiones y la igualación del precio de los factores: Aplicación de la “condición de lentes” en España/Regional Factor Distribution and Factor Price Equalisation: an Ap," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 25, pages 727-742, Diciembre.
    5. Brakman, Steven & van Marrewijk, Charles, 2013. "Lumpy countries, urbanization, and trade," Journal of International Economics, Elsevier, vol. 89(1), pages 252-261.
    6. Francisco Requena & Andrés Artal & Juana Castillo, 2008. "Testing Heckscher— Ohlin—Vanek Model Using Spanish Regional Data," International Regional Science Review, , vol. 31(2), pages 159-184, April.
    7. Kazuyuki Nakamura, 2015. "Computational investigation of the feasibility of factor price equalization," Letters in Spatial and Resource Sciences, Springer, vol. 8(2), pages 101-108, July.
    8. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    9. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 937-950, November.
    10. 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.
    11. Kwan Koo Yun & Siu-kee Wong, 2001. "The Lens Condition with Two Factors," Discussion Papers 01-08, University at Albany, SUNY, Department of Economics.

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    JEL classification:

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

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