SUFFICIENCY OF THE LENS CONDITION FOR FACTOR PRICE EQUALIZATION

Abstract.  Demiroglu and Yun (1999 ) and Wong and Yun (2003 ) gave counterexamples to show that the lens condition is not sufficient for factor price equalization. However, they leave the following two important problems untouched: why the lens condition is not sufficient for factor price equalization in general; and whether counterexamples can be given only in a very special case. This paper extends these papers to a framework without two input vectors being proportional to explain why the lens condition loses sufficiency and gives a lot of counterexamples which include those provided in above papers as special cases.