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The original H–O model assumed that the only difference between countries was the relative abundances of labour and capital. The original Heckscher–Ohlin model contained two countries, and had two commodities that could be produced. Since there are two (homogeneous) factors of production this model is sometimes called the "2×2×2 model".
Ricardo–Viner model. The Ricardo–Viner model, also known as the specific factors model, is an extension of the Ricardo model used in international trade theory. It was due to Jacob Viner 's interest in explaining the migration of workers from the rural to urban areas after the Industrial revolution. Unlike the Ricardian model, the specific ...
Comparative advantage in an economic model is the advantage over others in producing a particular good. A good can be produced at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. [ 1] Comparative advantage describes the economic reality of the gains from trade for individuals, firms, or ...
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-Ricardo model explained that countries of identical factor endowments would still trade due to differences in technology, as this would encourage specialisation and therefore trade, in exactly the same matter that was set out in the Ricardian model. Types. There are three types of intra-industry trade Trade in Homogeneous Goods.
In the early 1900s, a theory of international trade was developed by two Swedish economists, Eli Heckscher and Bertil Ohlin. This theory has subsequently become known as the Heckscher–Ohlin model (H–O model). The results of the H–O model are that the pattern of international trade is determined by differences in factor endowments.
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 ...
Leontief paradox. In economics, the Leontief's paradox is that a country with a higher capital per worker has a lower capital/labor ratio in exports than in imports. This econometric finding was the result of Wassily W. Leontief 's attempt to test the Heckscher–Ohlin theory ("H–O theory") empirically. In 1953, Leontief found that the United ...