Computational investigation of the feasibility of factor price equalization

We propose an empirical procedure for verifying the factor price equalization (FPE) condition. The FPE condition defined by Deardorff (J Int Econ 36:167–175, 1994 ) is converted to a standard linear programming problem. Although the procedure does not provide a graphical representation, it can be ap...

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Bibliographic Details
Published in:Letters in spatial and resource sciences 2015-07, Vol.8 (2), p.101-108
Main Author: Nakamura, Kazuyuki
Format: Article
Language:English
Subjects:
Agricultural Economics
Demography
Economics
Economics and Finance
Environmental Economics
Geographical Information Systems/Cartography
Landscape/Regional and Urban Planning
Original Paper
Regional/Spatial Science
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Summary:We propose an empirical procedure for verifying the factor price equalization (FPE) condition. The FPE condition defined by Deardorff (J Int Econ 36:167–175, 1994 ) is converted to a standard linear programming problem. Although the procedure does not provide a graphical representation, it can be applied for any number of primary factors of production. In addition, based on the solution vector of the linear programming problem, we can find what quantities of the primary factors of production should be reallocated between which regions to satisfy the FPE condition when the condition does not hold.
ISSN:1864-4031
1864-404X
DOI:10.1007/s12076-014-0115-1