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FACTOR PRICE EQUALISATION AMONG INTERNATIONAL FARMLAND MARKETS

FACTOR PRICE EQUALISATION AMONG INTERNATIONAL FARMLAND MARKETS Austraban JournoiofApricul~umlEconomrcs. Vol. 32. Nos 2and 3 (Aug/Dec 1988), pp. 142-152 FACTOR PRICE EQUALISATION AMONG INTERNATIONAL FARMLAND MARKETS JULIAN M. ALSTON and PAUL R. JOHNSON* Department of Agriculrurd Economics, University of California, Davis, CA 95616, USA North Carolina State University, Raleigh, NC, USA One of the major components of the ‘modern’ or ‘Heckscher-Ohlin’ theory of international trade is the ‘Factor Price Equaiisation Theorem’: international trade equalises factor rental prices between countries or regions. This theorem holds exactly under certain assumptions but most of the literature suggests only a tendency towards factor price equalisa- tion because at least some of the assumptions are thought to be violated.’ In the static context in which this theory is written, this means that factor prices will be more nearly equaiised than in the complete absence of trade. Thus, a tendency towards product price equalisation through partial rather than complete arbitrage in products may mean, for instance, that inter- national factor prices are partially, but not perfectly, equalised. Whether or not the assumptions are violated, the strength of the tendency towards factor price equalisation is an empirical question that might be answered by testing the theorem directly.’ The purpose of this paper is to http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

FACTOR PRICE EQUALISATION AMONG INTERNATIONAL FARMLAND MARKETS

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Publisher
Wiley
Copyright
Copyright © 1988 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1988.tb00681.x
Publisher site
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Abstract

Austraban JournoiofApricul~umlEconomrcs. Vol. 32. Nos 2and 3 (Aug/Dec 1988), pp. 142-152 FACTOR PRICE EQUALISATION AMONG INTERNATIONAL FARMLAND MARKETS JULIAN M. ALSTON and PAUL R. JOHNSON* Department of Agriculrurd Economics, University of California, Davis, CA 95616, USA North Carolina State University, Raleigh, NC, USA One of the major components of the ‘modern’ or ‘Heckscher-Ohlin’ theory of international trade is the ‘Factor Price Equaiisation Theorem’: international trade equalises factor rental prices between countries or regions. This theorem holds exactly under certain assumptions but most of the literature suggests only a tendency towards factor price equalisa- tion because at least some of the assumptions are thought to be violated.’ In the static context in which this theory is written, this means that factor prices will be more nearly equaiised than in the complete absence of trade. Thus, a tendency towards product price equalisation through partial rather than complete arbitrage in products may mean, for instance, that inter- national factor prices are partially, but not perfectly, equalised. Whether or not the assumptions are violated, the strength of the tendency towards factor price equalisation is an empirical question that might be answered by testing the theorem directly.’ The purpose of this paper is to

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Dec 12, 1988

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