Journal ArticleDOI
International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis
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In this article, the behavior of a small open economy facing perfectly elastic supply curves for some of its productive factors is examined, and it is shown that, as more and more factor-price rigidities are imposed on an economy, it comes closer to a state of factor price equalization.Abstract:
This paper examines the behavior of a small open economy facing perfectly elastic supply curves for some of its productive factors. In particular, the paper derives some comparative statics properties of such economies, compares them with the properties of otherwise identical economies in which all factor prices are determined endogenously, and investigates the relationship between factor-price rigidities, factor-price equalization, and the pattern of specialization. Among the new results which are proved, it is shown that, as more and more factor-price rigidities are imposed on an economy, it comes "closer" to a state of factor-price equalization.read more
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