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World Resources Determine World Prices

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  • Guo, Baoping

Abstract

This paper derived a general equilibrium of the Heckscher-Ohlin model for the context of two-factor, multiple-commodity, and multiple-country (2 x N x M model). The equalized factor price (PFE) and world commodity price at the equilibrium are just the prices Dixit and Norman predicted, that the prices from equilibriums remains the same when the allocation of factor endowments changes within (the 2 x N x M) IWE box. The study shows how price-trade equilibriums reached for multiple countries and how world prices was determined. The equilibrium and world price structure shows that world (factor endowments) resources determine the world price. This is another core understanding of international trade.

Suggested Citation

  • Guo, Baoping, 2017. "World Resources Determine World Prices," MPRA Paper 91095, University Library of Munich, Germany, revised 13 Dec 2018.
    • Handle: RePEc:pra:mprapa:91095
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    References listed on IDEAS

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    1. Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), 2013. "Palgrave Handbook of International Trade," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30531-1, October.
    2. Alan V. DEARDORFF, 2011. "Weak Links In The Chain Of Comparative Advantage," 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 9, pages 59-71, World Scientific Publishing Co. Pte. Ltd..
    3. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
    4. Henry Thompson, 2000. "Economic Integration," World Scientific Book Chapters, in: International Economics Global Markets and International Competition, chapter 9, pages 298-334, World Scientific Publishing Co. Pte. Ltd..
    5. 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..
    6. 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.
    7. Alan Woodland, 2013. "General Equilibrium Trade Theory," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 3, pages 39-87, Palgrave Macmillan.
    8. Chipman, John S, 1969. "Factor Price Equalization and the Stolper-Samuelson Theorem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 399-406, October.
    9. Baoping Guo, 2005. "Endogenous Factor-Commodity Price Structure by Factor Endowments," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(4), pages 484-484, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    IWE; Factor price equalization; Heckscher-Ohlin; Equilibrium price; equalized factor price; Dixit-Norman;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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