The authors give a simple, constructive proof that the lens condition implies the factor price equalization condition when there are only two factors. Taking stock of the conditions under which the lens condition is equivalent to the factor price equalization condition, there are the conditions of two factors or two goods or two countries, or the condition that the rank of the factor-use matrix is equal to the number of goods. It is shown that, in an essential sense, there are no other such conditions. Copyright Blackwell Publishing Ltd 2003.

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This paper examines the optimal industrial policy for an industry with a vertical market structure. A home firm and a foreign firm both import an intermediate good from a third country to produce a final good. How the home country government sets the optimal industrial policy has to take account of both profit shifting between the two final good producers and between the intermediate good producer and the home firm. We explain how the optimal industrial policy depends on the slope of the demand curve, the levels of technology spillover and product differentiation. In particular, there exists a critical level of technology spillover at which investments of the firms are neither strategic substitutes nor complements and the optimal industrial policy is always investment tax.

This paper considers the adjustment of external tariffs when two countries integrate and implement the Kemp-Wan-Grinols compensation scheme. Attention is also paid to the restrictions set by Article XXIV of GATT. This paper shows how the external tariffs would change in a three-good, three-country model under the assumption of gross substitutability. The results are sensitive to the initial trade pattern. In particular, they depend on the number of goods initially traded between the member countries. The analysis can be extended to a multi-commodity model if the preferences of the countries have identical CES representation. JEL classification: F11, F15L'ajustement des tarifs douaniers avec le monde exte´rieur dans le sche`me de compensation a`la Kemp-Wan-Grinols. Ce me´moire examine l'ajustement des tarifs avec le monde exte´rieur quand deux pays forment un tout e´conomique inte´gre´et mettent en place un sche`me de compensation a`la Kemp-Wan-Grinols. On prend en compte les restrictions impose´es par l'article XIV du GATT. On indique comment les tarifs avec le monde exte´rieur changeraient dans un mode`le a`trois pays et trois biens quand on postule un degre´ge´ne´ral de substituabilite´. Les re´sultats de´pendent du pattern initial de commerce : en particulier, ils de´pendent du nombre de biens initialement e´change´s entre les pays membres. L'analyse peut eˆtre ge´ne´ralise´e a`un mode`le a`plusieurs biens si les pre´fe´rences des pays ont une repre´sentation CES identique.

This paper considers the commodity prices–factor prices relation in models with more factors than consumption goods. Under some simple factor substitutability assumptions, many results in the n × n cases have counterparts in the l × n cases. The proportional price changes of the “middle factors” will be trapped between those of the “extreme factors”. A weak and a strong Stolper–Samuelson theorem can also be proven. If the numbers of goods and perfectly complementary factors are equal and the production functions have the nested constant elasticity of substitution form, two of the complementary factors would have the most extreme relative price changes, regardless of the factor intensities.