TY - JOUR
T1 - Factor market oligopsony and the production possibility frontier
AU - Devadoss, Stephen
AU - Song, Wongun
PY - 2003/9
Y1 - 2003/9
N2 - The authors consider a model with two final goods, one intermediate good, and two primary factors. One final good and the intermediate good are produced using primary factors, labor and capital. The other final good is produced using labor and the intermediate input. Producers of the second final good exert oligopsonistic market power on the intermediate input, which captures real world phenomena prevalent in the food processing and other manufacturing industries. If the capital/labor ratio in one final-good sector is in between those of the intermediate-input sector and the combined intermediate-input and the other final-product sectors, and if the oligopsony power is sufficiently large, the model generates results that are not adherent to the standard two-sector Heckscher-Ohlin model. Results that deviate from the H-O model include the relationships between factor prices and commodity prices, the price-output effect, tangency between the price line and the PPF, and the curvature of the PPF.
AB - The authors consider a model with two final goods, one intermediate good, and two primary factors. One final good and the intermediate good are produced using primary factors, labor and capital. The other final good is produced using labor and the intermediate input. Producers of the second final good exert oligopsonistic market power on the intermediate input, which captures real world phenomena prevalent in the food processing and other manufacturing industries. If the capital/labor ratio in one final-good sector is in between those of the intermediate-input sector and the combined intermediate-input and the other final-product sectors, and if the oligopsony power is sufficiently large, the model generates results that are not adherent to the standard two-sector Heckscher-Ohlin model. Results that deviate from the H-O model include the relationships between factor prices and commodity prices, the price-output effect, tangency between the price line and the PPF, and the curvature of the PPF.
UR - http://www.scopus.com/inward/record.url?scp=0142059672&partnerID=8YFLogxK
U2 - 10.1111/1467-9396.00414
DO - 10.1111/1467-9396.00414
M3 - Article
AN - SCOPUS:0142059672
SN - 0965-7576
VL - 11
SP - 729
EP - 744
JO - Review of International Economics
JF - Review of International Economics
IS - 4
ER -