ABSTRACT
The effects of a change in the relative factor endowment upon the world equilibrium price of the investment good can be analyzed. Excluding by assumption the case of factor value intensity reversals, from the effects of wage differentials on the specialization price ratios, the short-run trade pattern may be different from the non-wage differential case. Furthermore, concerning the long-run analysis, since the critical capital/labour endowment ratios for which the various specialization patterns occur are affected, the balanced growth equilibrium and hence the long-run pattern of specialization may be different from that in the non-wage differential case. In other words, the critical capital/labour endowment ratios for which various specialization patterns occur, as well as the corresponding equilibrium terms of trade, are in general different from the non-wage differential framework, since the system from which these equilibrium conditions are derived, differs.
