factor-price equalization theorem

E764587

economic theorem result in international trade theory

The factor-price equalization theorem is a result in international trade theory stating that free trade in goods can lead to the equalization of factor prices (like wages and returns to capital) across countries, even without factor mobility.

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All labels observed (1)

Label	Occurrences
factor-price equalization theorem canonical	1

Statements (46)

Predicate	Object
instanceOf	economic theorem ⓘ result in international trade theory ⓘ
addressesQuestion	whether trade in goods alone can equalize factor rewards internationally ⓘ
associatedWith	Bertil Ohlin NERFINISHED ⓘ Eli Heckscher NERFINISHED ⓘ Paul A. Samuelson NERFINISHED ⓘ Wolfgang F. Stolper NERFINISHED ⓘ
assumption	both countries produce both goods (diversified production) ⓘ countries share the same homothetic and identical preferences ⓘ factors of production are immobile internationally ⓘ factors of production are perfectly mobile between sectors within each country ⓘ identical constant-returns-to-scale technologies across countries ⓘ markets are in competitive general equilibrium ⓘ no barriers to trade in goods ⓘ no trade costs ⓘ perfect competition in all markets ⓘ there are at least two goods and two factors of production ⓘ
basedOnModel	Heckscher–Ohlin model NERFINISHED ⓘ
category	theorems in economics ⓘ theorems in international trade ⓘ
concerns	distribution of income between factors of production ⓘ equalization of returns to capital across countries ⓘ wage equalization across countries ⓘ
contrastsWith	models with international factor mobility ⓘ
coreClaim	factor prices such as wages and returns to capital can converge across countries through trade in goods alone ⓘ free trade in goods can equalize factor prices across countries ⓘ
field	general equilibrium theory ⓘ international economics ⓘ international trade ⓘ
formalizes	link between commodity prices and factor prices ⓘ
historicalPeriod	20th century ⓘ
implies	countries with different factor endowments can have the same factor prices under free trade ⓘ under its assumptions, trade in goods can substitute for factor mobility ⓘ
influencedBy	Walrasian general equilibrium theory NERFINISHED ⓘ neoclassical production theory ⓘ
limitation	exact factor-price equalization rarely observed empirically ⓘ sensitive to deviations from assumptions such as trade costs and technology differences ⓘ
logicalBasis	zero-profit conditions and cost-minimization in competitive equilibrium ⓘ
mathematicalFramework	2×2×2 Heckscher–Ohlin model NERFINISHED ⓘ
relatesConceptuallyTo	Heckscher–Ohlin theorem GENERATED ⓘ Rybczynski theorem GENERATED ⓘ Stolper–Samuelson theorem GENERATED ⓘ
requires	equalization of goods prices across countries ⓘ
statusInLiterature	benchmark result in neoclassical trade theory ⓘ
usedFor	analyzing effects of trade on wage inequality ⓘ studying relationship between globalization and factor incomes ⓘ

Referenced by (1)

Full triples — surface form annotated when it differs from this entity's canonical label.

Paul Samuelson → notableIdea → factor-price equalization theorem ⓘ