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The Heckscher–Ohlin model (/hɛkʃr ʊˈliːn/, H–O model) is a general equilibrium mathematical model of international trade, ...
The Heckscher–Ohlin theorem is one of the four critical theorems of the Heckscher–Ohlin model, developed by Swedish economist Eli Heckscher and Bertil Ohlin (his student). In the two-factor case, it states: "A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good."
Heckscher–Ohlin can refer to: Heckscher–Ohlin model, a general equilibrium mathematical model of international trade; Heckscher–Ohlin theorem, one of the four ...
The result was first proven mathematically as an outcome of the Heckscher–Ohlin model assumptions. Simply stated the theorem says that when the prices of the output goods are equalized between countries as they move to free trade, then the prices of the input factors (capital and labor) will also be equalized between countries.
Traditional trade models relied on productivity differences (Ricardian model of comparative advantage) or factor endowment differences (Heckscher–Ohlin model) to explain international trade. New trade theorists relaxed the assumption of constant returns to scale, and showed that increasing returns can drive trade flows between similar ...
The Heckscher–Ohlin Theorem, which is concluded from the Heckscher–Ohlin model of international trade, states: trade between countries is in proportion to their relative amounts of capital and labor. In countries with an abundance of capital, wage rates tend to be high; therefore, labor-intensive products, e.g. textiles, simple electronics ...
The Heckscher–Ohlin Theorem, which is concluded from the Heckscher–Ohlin model of international trade, states: trade between countries is in proportion to their relative amounts of capital and labor. In countries with an abundance of capital, wage rates tend to be high; therefore, labor-intensive products, e.g. textiles, simple electronics ...
The analysis and prediction of trade patterns through effective endowments and virtual endowments logically covered both the Heckscher-Ohlin trade pattern and the Leontief (paradox) trade pattern. Both are trade consequences, and both gain from trade. It shows that comparative advantage works when countries have different productivities.