Skip to main content
Article
Factor Growth and Equalized Factor Prices
International Review of Economics and Finance
  • E. Kwan Choi, Iowa State University
Document Type
Article
Publication Version
Submitted Manuscript
Publication Date
1-1-2008
DOI
10.1016/j.iref.2007.03.001
Abstract
This paper considers two simple questions relating to the Heckscher–Ohlin model: (i) How does factor growth affect the terms of trade between the North and the South? (ii) If factor prices are equalized by trade, at what levels are they equalized? Regardless of where it occurs, labor growth improves the terms of trade of the capital-abundant region, whereas capital growth has the opposite effect. Equalized factor prices are “less” than a convex combination of autarky factor prices. A numerical example using Cobb-Douglas production and utility functions illustrates the propositions.
Comments

NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Economics and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Economics and Finance 17 (2008), doi:10.1016/j.iref.2007.03.001.

Copyright Owner
Elsevier Inc.
File Format
application/pdf
Citation Information
E. Kwan Choi. "Factor Growth and Equalized Factor Prices" International Review of Economics and Finance Vol. 17 Iss. 4 (2008) p. 517 - 528
Available at: http://works.bepress.com/ekwan-choi/21/