Conditions for Factor Price Equalization in the Integrated World Economy Model

The lens condition proposed by Deardorff in 1994 has been argued not to be sufficient for factor price equalization in general. This paper shows that the lens condition is necessary and sufficient both in the two‐factor case and in the three‐good case. The results imply that two is the largest number of factors for the lens condition to guarantee factor price equalization when the number of goods and that of countries are arbitrary. A sufficient condition for factor price equalization is also given in the case where the number of goods, that of countries, and that of factors are all arbitrary.