ECON 372 Lecture 3: Summary 3- O'Rourke and Williamson
17 Apr 2018
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T e purpose of t s paper s to summar ze t e art cle, (cid:587)late n neteent -century anglo- American factor-pr ce convergence: were hecksc er and o l n r g t? (cid:588) by kev n. In this article, the authors examine a model created by heckscher and ohlin in the 19th century and try to determine if there is a relationship between factor-price convergence and commodity-price convergence. Factor price convergence refers to the phenomenon that happens to the price of factors, like capital and labour, when international trade takes place: the price of factors equalize. Whereas, commodity price convergence is the occurrence of commodity prices equalizing because of international trade. For commodity price convergence to take place, countries must use factors in which they have an abundance of, to create goods for international trade. This form of trade shows a pattern of commodity price convergence due to lowered transportation costs.
