Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101662
Authors: 
Albert, Max
Kohler, Wilhelm K.
Year of Publication: 
1995
Series/Report no.: 
Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 268
Abstract: 
We investigate how joint production affects the likelihood of factor price equalization (FPE) through trade. Following up on recent contributions by Samuelson (1992) and Jones (1992), we propose to take the relative size of the FPE region of endowment distributions to measure this likelihood. We show that the likelihood (1) may increase even if joint production leads to a decrease of the number of basic production processes, and (2) may decrease even if the number of basic production processes operated in equilibrium is the same as under non-joint production. Moreover, we reinterpret the formal arguments and apply them to a comparison between trade in intermediate versus trade in finished products. Our analysis throws light on the basic mechanism at work. It shows that goods trade and factor movements can be complements: Further integration of product markets can destroy FPE and create factor-price differences, thereby generating factor movements.
Document Type: 
Working Paper

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