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
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
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
International trade is introduced and general equilibrium yields the factor price
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
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