Title
An empirical test of the Dixit-Norman approach to factor price equalization, using cointegration techniques An empirical test of the Dixit-Norman approach to factor price equalization, using cointegration techniques
Author
Publication type
article
Publication
Tübingen ,
Subject
Politics
Economics
Source (journal)
Weltwirtschaftliches Archiv / Christian-Albrechts Universität Kiel. Institut für Weltwirtschaft. - Tübingen
Volume/pages
134(1998) :3 , p. 484-512
ISSN
0043-2636
ISI
000076470800005
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Abstract
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
E-info
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