NECESSARY AND SUFFICIENT CONDITIONS FOR FACTOR PRICE EQUALIZATION

Although models with factor price equalization are used frequently in both theoretical and applied research in international economics, only sufficient conditions for factor price equalization have been present ed in the literature. In this paper, we present necessary and sufficie nt conditions for FPE under quite general assumptions about the techno logies of different countries. The necessary and sufficient conditions we derive are consistent with joint production, decreasing returns to scale, and substantive differences in the technologies and endowments of different countries. Our results enable us to reconcile the classi cal approach and the integrated equilibrium approach to factor price e qualization.