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Factor price equalization beyond a “cubic” world

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  • Avik Chakrabarti

Abstract

The importance of factor price equalization (FPE) is widely recognized in economics. The FPE theorem states that, absent any factor intensity reversal, factor prices are equal across countries with identical technologies and product mixes. In a two-factor-two-good-two-country Heckscher-Ohlin model this is equivalent to countries’ factor endowments being contained in the diversification cone defined by goods’ factor intensities. This paper identifies a condition, stated in terms of the allocation of factor endowments across countries relative to the demand for and the factor intensities of goods, that is necessary and sufficient for FPE in a world with arbitrary number of countries, goods and factors. Copyright Springer-Verlag Berlin/Heidelberg 2006

Suggested Citation

  • Avik Chakrabarti, 2006. "Factor price equalization beyond a “cubic” world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 483-491, January.
    • Handle: RePEc:spr:joecth:v:27:y:2006:i:2:p:483-491
    DOI: 10.1007/s00199-005-0601-1
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    Cited by:

    1. Ravi Batra & Hamid Beladi & Reza Oladi, 2013. "Technical Progress and Real Wages Once again," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 506-518, August.
    2. Sugata Marjit & Hamid Beladi, 2009. "International And Intra‐National Trade: A Continuum Approach," The Japanese Economic Review, Japanese Economic Association, vol. 60(3), pages 320-332, September.
    3. 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.
    4. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2016. "Competitive General Equilibrium with Finite Change and Theory of Policy Making," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 1-7, March.
    5. Chakrabarti, Avik & Mitra, Rajarshi, 2010. "Skilled-unskilled wage inequality and offshore outsourcing with asymmetric adjustment costs," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 340-345, April.
    6. Hamid Beladi & Sugata Marjit & Reza Oladi, 2018. "Does protectionism harm unskilled workers?," Economics and Politics, Wiley Blackwell, vol. 30(3), pages 444-450, November.
    7. Hamid Beladi & Sugata Marjit & Reza Oladi & Lei Yang, 2021. "Malnutrition in the shadow of economic growth," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 500-514, February.

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