Factor price equalization: revisited

Although theoretical discussion of Factor Price Equalization (FPE) theorem has been quite prolific in the international economics literature, empirical tests of the FPE theorem have been very limited and inadequately performed. In this paper, we use Johansen's multivariate cointegration testing procedure to test statistically the FPE theorem among seven EC countries for 1960-91. The results show that the FPE theorem is strongly supported for the period considered.