The Heckscher-Ohlin Theorem

Paper Summary:

This paper discusses the Heckscher-Ohlin theorem that says that countries with more resources will export these resources and counties with more labor will export the intensive-intensive goods. The writer explains the assumptions on which this theorem is built, and discusses Adrian Wood's arguments that it is a feasible one as long as production is not mobile internationally. Using China and India for examples, the writer shows why this theory is now outdated, and Wood's arguments are flawed. The theory does not take into account the rapid changes that globalization and technology are making to the international landscape, or how many variables there are when attempting to predict and interpret international trade. The paper concludes that it is much more feasible to create an ideology that includes all of these new variables when discussing international trade.

From the Paper:

"International trade is something that will always be debated because it is interesting to see who has the advantages and why. The most common manner by which to explain the advantages that certain countries have over others in trade in by using a comparative advantage model. There will always be different scales because of the various differences between countries' finances, education levels, population, demographics, resources, and other factors. The Heckscher-Ohlin theorem does go a long way in showing why certain countries have an advantage in producing good that come from natural resources, it is still uncertain if this theorem can hold up when dealing with both skilled labour and the production of luxury goods because the climate is changing so rapidly in the world."

Sample of Sources Used:

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• Trefler, Daniel. "The Case of the Missing Trade." American Economic Review, 85-5 (December 1995): 1029-1046

More papers on The Heckscher-Ohlin Theorem:

• Term Paper # 127690 : "Heckscher-Ohlin Theorem and Japan"
• Essay # 35985 : "The Heckscher-Ohlin Theory"
• Book Review # 64457 : "Companies that Go International"

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