Trade liberalization and factor price convergence

This paper examines the effects of trade liberalization on international disparities in factor real returns in a model with more factors than goods. Existing trade interventions are assumed to be "restricting" trade. We find that any bias for or against factor price convergence depends on the underlying source of comparative advantage. Where trade is based on differences in factor endowments, trade liberalization has a bias towards factor price convergence. Where trade is based on technology differences, biases are more difficult to detect, but if they exist they are likely to work against factor price convergence. (C) 1999 Elsevier Science B.V. All rights reserved.