Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model

  1. Daniel Becker1,*,
  2. Erich Gundlach2,*

Article first published online: 19 OCT 2007

DOI: 10.1111/j.1467-9361.2007.00421.x

Issue

Review of Development Economics

Review of Development Economics

Volume 11, Issue 4, pages 685–698, November 2007

Additional Information

How to Cite

Becker, D. and Gundlach, E. (2007), Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model. Review of Development Economics, 11: 685–698. doi: 10.1111/j.1467-9361.2007.00421.x

Author Information

  1. 1

    Rostock University, Germany

  2. 2

    Kiel Institute for the World Economy, Germany

* *Becker: Rostock University, Ulmenstraße 69, 18057 Rostock, Germany. Tel: +49 381 4984313; E-mail: daniel.becker@uni-rostock.de. Gundlach: Kiel Institute for the World Economy, P.O. Box 4309, 24100 Kiel, Germany. Tel: +49 431 8814284; E-mail: erich.gundlach@ifw-kiel.de.

Publication History

  1. Issue published online: 19 OCT 2007
  2. Article first published online: 19 OCT 2007

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Abstract

We reconsider the effects of long-run economic growth on relative factor prices across cones of specialization. We model economic growth as exogenous technical change. Allowing for capital biased technical change with a sector bias and for endogenous commodity prices, we find that economic growth may increase or decrease factor price differences across cones. For a neutral demand side and capital biased growth in the most capital intensive sector, we find that economic growth encourages less factor price diversity across cones.

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