Factor price equalization is an economic theory, which states that the relative prices for two identical factors of production in the same market will eventually equal each other because of competition. The price for each single factor need not become equal, but relative factors will. Whichever factor receives the lowest price before two countries integrate economically and effectively become one market will therefore tend to become more expensive relative to other factors in the economy, while those with the highest price will tend to become cheaper. U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau of Economic Research (USA) - Economics material from the organization... In economics and business, the price is the assigned numerical monetary value of a good, service or asset. ... Classical economics distinguishes between three factors of production which are used in the production of goods: Land or natural resources - naturally-occurring goods such as soil and minerals. ... Street markets such as this one in Rue Mouffetard, Paris are still common in France. ... Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ...

An often-cited example of factor price equalization is wages. When two countries enter a free trade agreement, wages for identical jobs in both countries tend to approach each other. After NAFTA was signed, for instance, unskilled labor wages gradually fell in the United States, at the same time as they gradually rose in Mexico. The same force has applied more recently to the various countries of the European Union. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... The North American Free Trade Agreement, known usually as NAFTA, is a comprehensive trade agreement linking Canada, the United States, and Mexico in a free trade sphere. ...

The result was first proven mathematically as an outcome of the Heckscher-Ohlin model assumptions. The Heckscher-Ohlin model (H-O model) is a General equilibrium mathematical model of the macroeconomy in international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. ...