Factor intensities and factor substitution in general equilibrium: A Comment

Nakada, Yoshiaki (2015): Factor intensities and factor substitution in general equilibrium: A Comment.

Abstract

Jones and Easton (1983) analyzed how commodity prices affect factor prices in the three-factor two-good general equilibrium trade model. These relationships determine whether ‘a strong Rybczynski result’ holds or not. In subsection 5.2.4., they found that the set of three equations holds for ‘the economy-wide substitution’ under the assumption of ‘perfect complementarity’. And they applied this to their analysis. In the following, I demonstrate that this is impossible, hence their proof is not plausible. In subsection 5.2.5., they analyzed similarly. But their proof is not plausible, either.

• Item Type: MPRA Paper
• Language: English
• Keywords: three-factor two-good model; general equilibrium; Rybczynski result; economy-wide substitution; perfect complementarity.
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade

References

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Jones, R.W. and Easton S.T., 1983. Factor intensities and factor substitution in general equilibrium. Journal of International Economics 15, 65-99.

Sato R. and Koizumi T., 1973. On the Elasticities of Substitution and Complementarity. Oxford Economic Papers, 25, 44-56.

Suzuki, K., 1983. A synthesis of the Heckscher-Ohlin and the neoclassical models of international trade: a comment. Journal of International Economics 14, 141-4.

Thompson, H., 1985. Complementarity in a simple general equilibrium production model.　Canadian Journal of Economics 17, 616-621.