Pushing economies (and students) outside the factor price equalization zone
Oslington, Paul Towers, Isaac
Oslington, Paul
Towers, Isaac
Author
Abstract
Despite overwhelming empirical evidence of the failure of factor price equalization, most teaching of international trade theory (even at the graduate level) assumes that economies are incompletely specialized and that factor price equalization holds. The behavior of trading economies in the absence of factor price equalization is not well understood, and some major textbook treatments err. The authors map regions of specialization and diversification for standard competitive economies and show how outputs, goods, and factor prices change as economies move within and across different regions of diversification and specialization. Two examples of how the analysis can enrich graduate-level trade teaching are given: the substitutability of goods trade and factor movements, and debates over the trade and inequality.
Keywords
factor price equalization, integrated equilibrium, teaching, trade
Date
2009
Type
Journal article
Journal
The Journal of Economic Education
Book
Volume
40
Issue
4
Page Range
422-436