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 ?
Although the theoretical case for factor price equalization is compelling, the verdict on the actual effects of trade on wages has not vet been reached.
They also argue that factor price equalization implies a rise in the percent of unskilled workers within industries.
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.
Special emphasis will be given to Simon Kuznets' Inverted U-Hypothesis, and the effects of liberalization on economic development with special attention given to the Heckscher-Ohlin Model and Paul Samuelson's theory of Factor Price Equalization.
In 1948, Paul Samuelson explicated his theory of factor price equalization in his piece "International Trade and the Equalization of Factor Prices" for The Economic Journal.
Factor prices would not differ much between competitive trading economies, even if some of the conditions leading to complete factor price equalization do not hold.
Factor price equalization refers to an equality of factor prices of homogeneous factors of production.
To the extent that it does occur, factor price equalization can have a complicated array of effects on regional convergence.
Factor price equalization across regions within a country will also be affected by internal trade within the country.
The partial factor price equalization argument has been originated by Ohlin (1933).
hj~ we use Theorem 3, which suggests that the free international trade brings about a tendency towards factor price equalization.