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.