Share This Article:

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

Abstract Full-Text HTML Download Download as PDF (Size:467KB) PP. 129-137
DOI: 10.4236/ti.2012.33017    3,535 Downloads   5,608 Views  
Author(s)    Leave a comment

ABSTRACT

An analytical study is presented for the cross-sectional distribution of factor prices over time and across space. A drift-diffusion model is proposed to describe the dynamic process governing the fluctuations around the equilibrium distribution. The model is mechanical and descriptive in nature, and illustrates that the growth distribution of factor prices can be generated by a single stochastic process that builds upon the theory of diffusion processes. An empirical application of the proposed model, to the evolution of the distribution of incomes for 186 countries, recorded from 1993 up to 2007, illustrates the applicability of the proposed method and suggests that diffusion may be a preferable technique for the analysis of the spatial dynamics in factor prices.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

F. Hashemi, "On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices," Technology and Investment, Vol. 3 No. 3, 2012, pp. 129-137. doi: 10.4236/ti.2012.33017.

References

[1] R. J. Barro, “Economic Growth in a Cross Section of Countries,” The Quarterly Journal of Economics, Vol. 106, No. 2, 1991, pp. 407-443.
[2] N. G. Mankiw, D. Romer and D. N. Weil, “A Contribution to the Empirics of Economic Growth,” The Quarterly Journal of Economics, Vol. 107, No. 2, 1992, pp. 407-437.
[3] D. T. Quah, “Galton’s Fallacy and Tests of the Convergence Hypothesis,” The Scandinavian Journal of Economics, Vol. 95, No. 4, 1993, pp. 427-443.
[4] D. T. Quah, “Convergence Empirics across Economies with (Some) Capital Mobility,” Journal of Economic Growth, Vol. 1, No. 1, 1996, pp. 95-124.
[5] H. Flam and M. Flanders, “Heckscher-Ohlin Trade Theory,” Massachusetts Institute of Technology Press, Cambridge, 1991.
[6] J. B. De Long, “Productivity Growth, Convergence, and Welfare: Comment,” The American Economic Review, Vol. 78, No. 5, 1988, pp.1138-1154.
[7] W. Leontief, “Domestic Production and Foreign Trade: The American Capital Position Re-Examined,” Proceedings of the American Philosophical Society, Vol. 97, No. 4, 1953, pp. 332-349.
[8] E. E. Leamer, “The Leontief Paradox, Reconsidered,” Journal of Political Economy, Vol. 88, No. 3, 1980, pp. 495-503.
[9] D. Trefler, “International Factor Price Differences: Leontief Was Right!” Journal of Political Economy, Vol. 101, No. 6, 1993, pp. 961-987.
[10] D. Trefler, “The Case of the Missing Trade and Other Mysteries,” The American Economic Review, Vol. 85, No. 5, 1995, pp. 1029-1046.
[11] R. J. Barro and X. Sala-i-Martin, “Technological Diffusion, Convergence, and Growth,” Journal of Economic Growth, Vol. 2, No. 1, 1997, p. 126.
[12] P. A. Samuelson, “International Trade and the Equalisation of Factor Prices,” The Economic Journal, Vol. 58, 1948, pp. 163-184.
[13] R. J. Barro and X. Sala-i-Martin, “Convergence,” Journal of Political Economy, Vol. 100, No. 2, 1992, pp. 223-251.
[14] B. S. Bernanke and R. S. Gürkaynak, “Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously,” In: B. Bernanke and K. Rogoff, Eds., NBER Macroeconomics Annual 2001, MIT Press, Massachusetts, 2002, pp. 11-17.
[15] G. D. Hansen and E. C. Prescott, “Malthus to Solow,” The American Economic Review, Vol. 92, No. 4, 2002, pp. 1205-1217.
[16] D. Ben-David, “Equalizing Exchange: Trade Liberalization and Income Convergence,” The Quarterly Journal of Economics, Vol. 108, No. 3, 1993, pp. 653-679.
[17] A. De Juan and S. M. Arroyo, “European Incomplete Catching-Up,” Empirical Economics, Vol. 36, No. 2, 2009, pp. 385-402.
[18] F. A. R. Gomes and C. G. Da Silva, “Hysteresis versus NAIRU and Convergence versus Divergence: The Behavior of Regional Unemployment Rates in Brazil,” The Quarterly Review of Economics and Finance, Vol. 49, No. 2, 2009, pp. 308-322.
[19] D. J. Webber and P. White, “An Alternative Test to Check the Validity of Convergence Results,” Applied Economics Letters, Vol. 16, No. 18, 2009, pp. 1825-1829.
[20] C. Bajona and T. J. Kehoe, “Trade, Growth and Convergence in a Dynamic Heckscher-Ohlin Model,” Review of Economic Dynamics, Vol. 13, No. 3, 2010, pp. 487-513.
[21] N. Palan and C. Schmiedeberg, “Structural Convergence of European Countries,” Structural Change and Economic Dynamics, Vol. 21, No. 2, 2010, pp. 85-100.
[22] R. Solow, “A Contribution to the Theory of Economic Growth,” The Quarterly Journal of Economics, Vol. 70, No. 1, 1956, pp. 65-94.
[23] M. Friedman, “Do Old Fallacies Ever Die?” Journal of Economic Literature, Vol. 30, No. 4, 1992, pp. 2129-2132.
[24] R. E. Lucas, “Trade and the Diffusion of the Industrial Revolution,” American Economic Journal: Macroeconomics, Vol. 1, No. 1, 2009, pp. 1-25.
[25] J. D. Sachs and A. M. Warner, “Economic Convergence and Economic Policies,” Working Paper No. 5039, National Bureau of Economic Research, Cambridge, 1995.
[26] D. Fudenberg and D. K. Levine, “Learning and Equilibrium,” Annual Review of Economics, Vol. 1, 2009, pp. 385420.
[27] J. Hirshleifer, “Competition, Cooperation, and Conflict in Economics and Biology,” The American Economic Review, Vol. 68, No. 2, 1978, pp. 238-243.
[28] J. Hirshleifer, “Economics from a Biological Viewpoint,” Journal of Law and Economics, Vol. 20, No.1, 1977, pp. 1-52.
[29] D. Levine, “Is Behavioral Economics Doomed? The Ordinary versus the Extraordinary,” 2009. http://www.dklevine.com/papers/behavioral-doomed.pdf
[30] P. R. Krugman, “The Self-Organizing Economy,” Blackwell Publishers, Cambridge, 1996.
[31] R. L. Axtel, “Zip Distribution of US Firm Sizes,” Science, Vol. 293, No. 5536, 2001, pp. 1818-1820.
[32] Hashemi, “A Dynamic Model of Size Distribution of Firms Applied to U.S. Biotechnology and Trucking Industries,” Small Business Economics, Vol. 21, No. 1, 2003, pp. 27-36.

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.