A Note on the Empirical Implementation of Lens Condition, Issue 11448
National Bureau of Economic Research, 2005 - Econometric models - 16 pages
"Deardorff [Journal of International Economics 36 (1994) 167-175] offers an intuitively appealing test for factor price equality (FPE). He demonstrates that FPE is impossible if the set (i.e., lens) of points defined by regional factor abundance vectors does not lie within the set of points defined by goods' input intensities. This note demonstrates that empirical implementation of the lens condition is problematic if the "true" number of either goods or regions is unknown. We show that satisfaction of the lens condition is more likely when goods are relatively disaggregate compared to regions"--National Bureau of Economic Research web site.
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6/05 Working Papers aggregate industry Andrew Business Cycle Corporate Finance credit card cumulative endowment cumulative share data aggregation Deardorff s 1994 Debaere defined by regional Demiroglu diagonal sorts disaggregate industries Disaggregation Increases Lens empirical implementation factor endowments factor intensities factor price equality factor usages factor use lens finding a violation FPE is impossible FPE is possible full subscription graph represent four Increases Lens Area industry aggregation industry and region industry disaggregation increases industry lens IWE equilibrium lens condition lens size i.e. lenses defined level of aggregation level of industry likelihood of finding lower half Mexico Monetary Economics NBER non-production skilled number closest number of regions Partial Subscription points defined price equality FPE production unskilled Raymond Robertson region lens regional factor abundances relatively disaggregate compared Schott set of points share of skilled skill abundance skilled and unskilled skilled workers sub-aggregates sufficient for FPE two-digit CMAP industries unskilled workers vectors