In order to compare factor prices
in the trade equilibrium, ??, with what they would have been in autarky, we take the ratio of (2) and (4).
Hence, adjustment takes place solely via changes in relative factor prices
.(4) When [x.sub.2]-production is abandoned, production conditions in the X-industry are fully embodied in the [x.sub.1]-isoquants.
Engelhardt attempts to show that Keynes's Marginal Efficiency of Capital (MEC) and the Net Present Value (NPV) always give identical rankings if factor prices
And third, as Feenstra and Hanson (1999), henceforth FH, demonstrate, if production is fragmented, changes in the parameters of the production function over time can shift the composition of activities that are performed abroad in a given industry, leading to non-neutral effects on productivity and factor prices
. Countries and industries with better access to overseas production activities, that is, larger levels of supplier access, would be more likely to observe such changes.
The long-run in our approach is defined as a period of time in which now factor prices
also vary, along with the quantity of labor and the general price level, while the capital stock and technology remain fixed.
Thus they affect relative factor prices
, total production, and output prices.
(3) Gross profit divided by value-added at factor prices
, where taxes on output, and subsidies for it, have been considered.
The three unknown factor prices
, W, r and [P.sub.Y], are determined from Equations (1-3) independent of the factor endowments.
Samuelson popularized the theory by casting it in a 2X2X2 form that laid out all of the necessary assumptions of the theory that had been left previously unstated, such as the need to assume that factor intensities don't reverse as factor prices
These limitations have to do with the measurability of the autarky factor prices
which are used to calculate the different countries' factor abundance and the value of their factor intensity variables.
Rather than defend Keynes against Fuller's (2013) criticism, my purpose was to emphasize the flawed assumption of sticky factor prices
upon which Keynes's conclusions rest.
All factor prices
increase as a result of trade liberalization, ranging from 1.12% for the rental rate to 1.60% for the wages of unskilled and skilled labor.