Factor Price Equality and Biased Technical Change in a Two-Cone Trade Model |
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Authors: | Daniel Becker Erich Gundlach |
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Institution: | Rostock University, Germany; Kiel Institute for the World Economy, Germany |
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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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