Topic
Factor price
About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.
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TL;DR: The Heckscher-Ohlin model as discussed by the authors has become part of the basic structure of the theory of international trade, and it has replaced the classical and neo-classical method of approach, in which comparative costs provided the starting point for the theory and its raison d'etre.
Abstract: The particular approach to the general theory of international trade which was first made by Heckscher2 and which was developed, and first published in English by Ohlin3 has now become part of the basic structure of the theory. In a sense it has replaced the classical and neo-classical method of approach, in which comparative costs provided the starting point for the theory of international trade, and its raison d'etre. There is, of course, no real conffict between the Heckscher-Ohlin approach and that by way of comparative costs. Comparative costs, properly stated, emerge from the Heckscher-Ohlin model, and this model, in fact, goes behind comparative costs and establishes them as due to something more fundamental, differences in factor endowments. As far as the theory of commodity trade is concerned, virtually all of the traditional structure of analysis could be carried out in terms of some elaboration of the comparative costs approach, such as the assumption of different, given, transformation functions for the trading countries. But the Heckscher-Ohlin model provided, for the first time, an analysis that was capable of integrating the factor markets into international trade theory in a satisfactory way, and much of its impact has been in this field. To a body of international trade theory which consisted primarily of propositions about the relative prices (or the results of certain relationships between the prices) of goods, there was now added a series of propositions about the relative prices of factors, culminating in the recent discussions concerning " factor price equalisation 4.4 In its simplest (and, in many ways, most revealing) form, the Heckscher-Ohlin model concerns itself with a world which consists of a group of countries which use identical factors to produce identical goods by the use of identical production functions, these production
40 citations
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TL;DR: In this paper, the authors present a dynamic comparative advantage model in which moderate reductions in trade costs can generate sizable increases in trade volumes over time and a simulation exercise shows that a fall in trade cost over time produces a nonlinear increase in the trade share of output as in the data.
Abstract: We present a dynamic comparative advantage model in which moderate reductions in trade costs can generate sizable increases in trade volumes over time A fall in trade costs has two effects on the volume of trade First, for given factor endowments, it raises the degree of specialization of countries, leading to a larger volume of trade in the short run Second, it raises the factor price of each country's abundant production factor, leading to diverging paths of relative factor endowments across countries and a rising degree of specialization A simulation exercise shows that a fall in trade costs over time produces a non-linear increase in the trade share of output as in the data Even when elasticities of substitution are not particularly high, moderate reductions in trade costs lead to large trade volumes over time
40 citations
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TL;DR: In this paper, the authors report that the price of a 6.5-oz Coca-Cola was 5c from 1886 until 1959, and they find that this unusual rigidity is best explained by a contract between the Company and its parent bottlers that encouraged retail consumers to maintain price maintenance, and a single-coin vending machine technology, which limited the Company's price adjustment options due to limited availability and unreliability of the existing flexible price adjustment technologies.
Abstract: We report that the price of a 6.5-oz Coca-Cola was 5c from 1886 until
1959. Thus, we are documenting a nominal price rigidity that lasted more than
70 years! The case of Coca-Cola is particularly interesting because during
the 70-year period there were substantial changes in the soft drink industry as
well as two World Wars, the Great Depression, and numerous regulatory
interventions and lawsuits, which led to substantial changes in the Coca-
Cola market conditions. The nickel price of Coke, nevertheless, remained
unchanged. We find that this unusual rigidity is best explained by (1) a
contract between the Company and its parent bottlers that encouraged retail
price maintenance, (2) a single-coin vending machine technology, which
limited the Company's price adjustment options due to limited availability
and unreliability of the existing flexible price adjustment technologies, and
(3) a single-coin monetary transaction technology, which limited the Company's
price adjustment options due to the customer "inconvenience cost."
We show that these price adjustment costs are of a different nature than
the standard menu cost, and their estimates exceed the existing estimates
by an order of magnitude. A possible broader relevance of the nickel Coke
phenomenon is discussed in the context of Nickel and Dime Stores, which
were popular in the US in the late 1800s and the early 1900s.
40 citations
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TL;DR: In this article, the authors reveal empirical evidence on parts and components trade as an indicator for international fragmentation of production in the European Union and determine its main explanatory factors, including industry specific factors as well as communication and transportation infrastructure are likewise important for shifting production to or sourcing components from foreign countries.
Abstract: The growth in world trade during the last decades was largely caused by increasing bilateral exchanges of parts and components as a consequence of international fragmentation of production. Apparently, the international integration of the Newly Industrializing and Eastern European economies prompted firms in ‘high-wage’ countries to exploit factor price differences in order to increase their international competitiveness. However, theory predicts that, beside factor price differences, international fragmentation of production should be driven by a multitude of additional determinants. Against this background, the present paper reveals empirical evidence on parts and components trade as an indicator for international fragmentation of production in the European Union and determines its main explanatory factors. The results of a panel data analysis show that especially industry specific factors as well as communication and transportation infrastructure are likewise important for shifting production to or sourcing components from foreign countries.
40 citations
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TL;DR: In this paper, the authors examined the price dynamics of a rice market using dynamic programming techniques and showed that interventions that remove private disincentives (such as storage subsidies) are much cheaper than direct intervention by government, but the impact on the probability distribution of prices is quite different.
40 citations