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An empirical test of the Dixit-Norman approach to factor price equalization, using cointegration techniques
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| Abstract |
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| Factor price equalization (FPE) occurs when international trade equilibrium reproduces the integrated world equilibrium (IWE). This allows a straightforward test of a necessary condition for FPE provided one has an idea of the IWE. The author considers Germany as such for France, Belgium and the Netherlands. Cointegration estimation techniques are preferred to SURE, because of endogenity and nonstationarity of the variables. Using the coefficient restrictions, estimation is performed with French and Belgian factor endowments and German sector allocations. Finally, FPE is checked by testing appropriate coefficient restrictions. Concluding, the author finds no long-term trade equilibrium with FPE for the countries considered. JEL no. F11, F12 | | |
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English
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Weltwirtschaftliches Archiv / Christian-Albrechts Universität Kiel. Institut für Weltwirtschaft. - Tübingen | |
| Publication |
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Tübingen : 1998
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1610-2878
0043-2636
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134:3(1998), p. 484-512
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000076470800005
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