Factor Price Equalization Theorem

Discipline: Economics

Formulated by American economist Paul Samuelson (1915- ) on the basis of the Heckscher-Ohlin Trade Theory, factor price equalization theorem postulates that free trade in commodities will eliminate price differentials, thereby effecting an equalization of factor prices; especially wages and interest rates.

Also see: absolute advantage theory, customs union theory, comparative costs, rybczynski theorem

Source:
A P Lerner, 'Factor Prices and International Trade', Econometrica, XIX (1952), 1-15

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