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World Equalized Factor Price and Integrated World Trade Space

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  • Guo, Baoping

Abstract

This study derived a general equilibrium for the Heckscher-Ohlin model at the context of higher dimensions. The equalized factor price at the equilibrium is the Dixit-Norman price, i.e. that the world price will remain the same when allocations of factor endowments change within the IWE box . The study explored a way to show the legacy of comparative advantages on the Heckscher-Ohlin model and demonstrated that the equalized factor price and world commodity price at the equilibrium ensured that the countries participating free trade gain from trade. The solution analytically addresses the Heckscher-Ohlin theorem with trade volume, the Factor-Price Equalization theorem with price solution, and comparative advantages with gains from trade. It shows the hided important logic in the IWE and the Heckscher-Ohlin model as that world factor endowments determine world price.

Suggested Citation

  • Guo, Baoping, 2018. "World Equalized Factor Price and Integrated World Trade Space," MPRA Paper 92503, University Library of Munich, Germany, revised Feb 2019.
    • Handle: RePEc:pra:mprapa:92503
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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

    Factor Price Equalization; Integrated World Equilibrium; Heckscher-Ohlin Model; General Equilibrium; Cone of Commodity Price.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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