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Notes on factor price equality and biased technical change in a two-cone trade model

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  • Becker, Daniel Thomas
  • Gundlach, Erich

Abstract

We reconsider the effects of long-run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that economic growth encourages less factor price diversity across cones.

Suggested Citation

  • Becker, Daniel Thomas & Gundlach, Erich, 2006. "Notes on factor price equality and biased technical change in a two-cone trade model," Thuenen-Series of Applied Economic Theory 68, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:68
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    References listed on IDEAS

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    More about this item

    Keywords

    Factor Price Equalization; Cones of Diversification; Trade; Technical Change; Growth;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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