CONTENT ARTICLES IN ECONOMICS Pushing Economies (and Students) Outside the Factor Price Equalization Zone Paul Oslington and Isaac Towers ABSTRACT: Despite overwhelming empirical evidence for the failure of factor price equalization most teaching of international trade theory (even at the graduate level) assumes that economies are incompletely specialized and factor price equalization holds. The behavior of trading economies in the absence of factor price equalization is not well understood, and some major textbook treatments err. The authors map regions of specialization and diversification for standard competitive economies and show how outputs, good and factor prices change as economies move within and across different regions of diversification and specialization. Two examples of how the analysis can enrich graduate-level trade teaching are given – the substitutability of goods trade and factor movements, and debates over the trade and inequality. Keywords: integrated equilibrium, factor price equalization, teaching, trade JEL Codes: A20, F11, F16 ____________________________________________________________ * Paul Oslington is Professor of Economics, Australian Catholic University 7 Mount Street North Sydney, NSW 2060, Australia. Email: paul.oslington@acu.edu.au Telephone: 61 2 9739 2868 Isaac Towers is Lecturer in Mathematics at University of New South Wales/Australian Defence Force Academy. The authors thank seminar participants at University of New South Wales, Australian National University, and Princeton University, and the anonymous referees for helpful comments. 1