Abstract
We investigate how joint production affects the likelihood of factor price equalization (FPE) through trade. Following up on recent contributions by Samuelson (1992) and Jones (1992), we propose to take the relative size of the FPE region of endowment distributions to measure this likelihood, and we show that it mayincrease even if joint production leads to adecrease of the number of basic production processes, and it maydecrease even if the number of basic production processes operated in equilibrium isthe same as under nonjoint production. A 2×2×2 example is analyzed in more detail. Moreover, we show that the argument of Jones (1992) can be reinterpreted in a more applied direction by considering the effects of switching from a regime where only intermediate products are traded to a regime where all products are traded. The paper shows that the likelihood of FPE may decrease by integrating product markets in this way. Still more surprising is the fact that integration may even destroy FPE.
Similar content being viewed by others
References
Albert, M. (1994):Das Faktorpreisausgleichstheorem. Tübingen: Mohr (Siebeck).
Chang, W. W., Ethier, W. J., and Kemp, M. C. (1980): “The Theorems of International Trade with Joint Production.”Journal of International Economics 10: 377–394.
Dixit, A. K., and Norman, V. (1980):Theory of International Trade. Cambridge: Cambridge University Press.
Ethier, W. J. (1974): “Some of the Theorems of International Trade with Many Goods and Factors.”Journal of International Economics 4: 199–206.
Heckscher, E. F. (1991): “The Effect of Foreign Trade on the Distribution of Income.” InHeckscher-Ohlin Trade Theory, edited by H. Flam and J. M. Flanders. Cambridge, MA: MIT Press.
Helpman, E., and Krugman, P. R. (1985):Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
Jones, R. W. (1992): “Jointness in Production and Factor-Price Equalization.”Review of International Economics 1: 10–18.
Kemp, M. C., and Okawa, M. (1995): “Factor Price Equalization Under Imperfect Competition.” Paper presented at the conference “Recent Developments in International Trade,” Aix en Provence, 1995.
Lang, S. (1970):Linear Algebra, 2nd ed. Reading, MA: Addison-Wesley.
Mas-Colell, A. (1979): “Two Propositions on the Global Univalence of Systems of Cost Functions.” InGeneral Equilibrium, Growth and Trade, edited by J. R. Green and J. A. Scheinkman. New York: Academic Press.
McKenzie, L. W. (1955): “Equality of Factor Prices in World Trade.”Econometrica 23: 239–257.
Kohli, U. (1983): “Non-Joint Technologies.”Review of Economic Studies 50: 209–219.
— (1991):Technology, Duality, and International Trade. Ann Arbor, MI: University of Michigan Press.
Samuelson, P. A. (1948): “International Trade and the Equalization of Factor Prices.”Economic Journal 58: 163–184.
— (1949): “International Factor Price Equalization Once Again.”Economic Journal 59: 181–198.
— (1953): “Prices of Factors and Goods in General Equilibrium.”Review of Economic Studies 21: 1–20.
— (1992): “Factor-Price Equalization by Trade in Joint and Non-Joint Production.”Review of International Economics 1: 1–9.
Travis, W. P. (1964):The Theory of Trade and Protection. Cambridge, MA: Harvard University Press.
Uzawa, H. (1959): “Prices of the Factors of Production in International Trade.”Econometrica 27: 448–468.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Albert, M., Kohler, W. Factor-price equalization under joint and nonjoint production. Zeitschr. f. Nationalökonomie 62, 271–294 (1995). https://doi.org/10.1007/BF01238820
Received:
Revised:
Issue Date:
DOI: https://doi.org/10.1007/BF01238820