Factor Price


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Factor Price

The price at which the means of production (that is, land, labor, capital and sometimes entrepreneurship) are sold. Economists disagree about what determines factor prices. Marxists and classical economists argue that factor prices represent the intrinsic value of the means of production. Other economists, however, believe that factor prices come from demand for the means of production.
References in periodicals archive ?
Lastly, an analysis of the effects liberalization and factor price equalization have on income inequality in developing countries will be put forward and how this affects inequality in Brazil
fixed input/output coefficients), because for small changes the alterations in techniques of production called for by factor price changes lead to second-order changes in unit costs.
As a sub-result of that analysis we studied the Heckscher-Ohlin (H-O) factor proportions theory of trade and the related theorem of factor price equalization.
This study demonstrates that the absolute factor price and commodity prices in the Heckscher-Ohlin model after trade can be determined by exogenous factor endowments under the assumption of the identical demand tastes or the identical homothetic preference.
This inelasticity is called near factor price equalization (NFPE).
While the analysis focuses on issues of labour adjustment associated with such convergence, it eclectically draws on the extensive literature, much of it recent, that has emerged in related areas: growth convergence and preconditions for growth; migration, resource rents and equalization payments; spatial convergence and the growth and decline of cities; neighbourhood effects and the social transmission of inequality; interjurisdictional competition for investment and jobs; and trade liberalization and factor price equalization.
International trade is introduced and general equilibrium yields the factor price equalization theorem.
These assumptions ensure that local factor price equalization does not hold.
This is purely a domestic factor price effect and is not influenced by the level of factor prices elsewhere.
Contrary to the original proof of this theorem, given by Vanek(4), factor price equalization is not assumed in Bertrand's model.
The resulting estimates can not only be used to derive the elasticities of substitution and complementarity but can also be used to derive the factor price elasticities.