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Factor Price Convergence in the Late Nineteenth Century

Kevin H. O'Rourke, Alan M. Taylor and Jeffrey G. Williamson
International Economic Review
Vol. 37, No. 3 (Aug., 1996), pp. 499-530
DOI: 10.2307/2527439
Stable URL: http://www.jstor.org/stable/2527439
Page Count: 32
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Factor Price Convergence in the Late Nineteenth Century
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Abstract

We examine a dramatic historical episode of factor price convergence in the late nineteenth century. Our focus is convergence between Old World and New, and the analysis centers on land and labor. Wage-rental ratios boomed in the Old World and collapsed in the New, moving the resource-rich, labor-scarce New World closer to the resource-scarce, labor-abundant Old World. We use econometrics and simulations to identify pro-convergence forces which include commodity price convergence, factor accumulation, and factor-saving biases. The results confirm that open-economy characteristics and international market integration are important sources of convergence.

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