Factor Price Equalization


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Factor Price Equalization

The theory that the prices of two identical means of production in different areas will eventually equal each other. For example, if wages in one region exceed wages in another, they will gradually fall in the first region and rise in the second until they are the same. Factor price equalization works best when factor mobility exists. See also: Factor Price.
References in periodicals archive ?
Keywords: Kuznets Curve, Gini Coefficient, Brazil, Factor Price Equalization
Finally this paper will seek to demonstrate the effects liberalization has on income inequality in Brazil through an analysis of Paul Samuelson's Factor Price Equalization Theory.
First of all, the abstract theories behind the formal models lead to the theorem of factor price equalization between trading partners, and these factor prices are endogenous to the system, that is, determined within the solution of the system.
For a wide variety of--BUT NOT ALL--conditions, using the theory based on these assumptions just stated, free trade will lead to factor price equalization among countries.
20) This implies a tendency towards factor price equalization for the same type of labour across the trading partners.
Factor price equalization refers to an equality of factor prices of homogeneous factors of production.
This sea of excess labor accentuates the downward pressures of a skill-intensive technology shift and global factor price equalization.
14) Moreover, models that assume local factor price equalization have other drawbacks.
Free international trade brings about a tendency (and only a tendency) towards factor price equalization.
Given that all of the Heckscher-Ohlin-Samuelson-Jones pre-requisites are satisfied in this problem, that is, that both countries use the same linear homogeneous functions for abatement and sequestration as well as for production, that the level of pollution is global, and that pollution damage is identically multiplicative, the factor price equalization theorem must in fact hold.
The inelasticity of these [Delta]w/[Delta]v terms is called near factor price equalization (NFPE).
The factor price equalization theorem in its most stringent form precdicts that if goods sell for the same price regardless of where they are produced, then workers who produce them will earn equal wages.