Kiel Working Papers, Kiel Institute for World Economics
No 1300:
Notes on Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model
Daniel Becker and Erich Gundlach
Abstract: We reconsider the effects of long-run economic growth on
relative factor prices across cones of specialization. We model economic
growth as exogenous technical change. Allowing for capital biased technical
change with a sector bias and for endogenous commodity prices, we find that
economic growth may increase or decrease factor price differences across
cones. For a neutral demand side and capital biased growth in the most
capital intensive sector, we find that economic growth encourages less
factor price diversity across cones.
Keywords: factor price equality, economic growth, two cone trade model; (follow links to similar papers)
JEL-Codes: F11,; O40; (follow links to similar papers)
17 pages, September 2006
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