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Equalized Factor Price and Integrated World Equilibrium

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  • Guo, Baoping

Abstract

This paper derives a general equilibrium of the Heckscher-Ohlin model. The equalized factor price at the equilibrium is just the price that Dixit and Norman (1980) described in their Integrated World Equilibrium (IWE), i.e. that equalized factor price and common commodity price remain the same when the allocation of factor endowments changes within the IWE box. This is the first analytical solution that presents an equalized factor price for the Heckscher-Ohlin model. The study demonstrates that giving an IWE box, there is only one equalized factor price with the property of the IWE price. The equilibrium solution is a joint statement of the Heckscher-Ohlin theorem and the factor-price equalization theorem.

Suggested Citation

  • Guo, Baoping, 2015. "Equalized Factor Price and Integrated World Equilibrium," MPRA Paper 92051, University Library of Munich, Germany, revised Feb 2019.
    • Handle: RePEc:pra:mprapa:92051
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    File URL: https://mpra.ub.uni-muenchen.de/96816/1/MPRA_paper_96816.pdf
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    References listed on IDEAS

    as
    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, March.
    2. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    3. 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..
    4. 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.
    5. 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.
    6. Avinash Dixit, 2012. "Paul Samuelson's Legacy," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 1-31, July.
    7. 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

    Factor content of trade; H-O model; trade; factor price equalization; Heckscher-Ohlin; General equilibrium of trade; Integrated World Equilibrium; IWE;
    All these keywords.

    JEL classification:

    • A2 - General Economics and Teaching - - Economic Education and Teaching of Economics
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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