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5: The Heckscher-Ohlin (Factor Proportions) Model
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- 5.1: Chapter Overview
- 5.2: Heckscher-Ohlin Model Assumptions
- 5.3: The Production Possibility Frontier (Fixed Proportions)
- 5.4: The Rybczynski Theorem
- The Rybczynski theorem demonstrates how changes in an endowment affect the outputs of the goods when full employment is maintained. The theorem is useful in analyzing the effects of capital investment, immigration, and emigration within the context of a Heckscher-Ohlin (H-O) model.
- 5.5: The Magnification Effect for Quantities
- 5.6: The Stolper-Samuelson Theorem
- 5.7: The Magnification Effect for Prices
- 5.8: The Production Possibility Frontier (Variable Proportions)
- 5.9: The Heckscher-Ohlin Theorem
- 5.10: Depicting a Free Trade Equilibrium in the Heckscher-Ohlin Model
- 5.11: National Welfare Effects of Free Trade in the Heckscher-Ohlin Model
- 5.12: The Distributive Effects of Free Trade in the Heckscher-Ohlin Model
- 5.13: The Compensation Principle
- 5.14: Factor-Price Equalization
- The fourth major theorem that arises out of the Heckscher-Ohlin (H-O) model is called the factor-price equalization theorem. 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 factors (capital and labor) will also be equalized between countries. This implies that free trade will equalize the wages of workers and the rents earned on capital throughout the world.
- 5.15: The Specific Factor Model- Overview
- The specific factor (SF) model was originally discussed by Jacob Viner, and it is a variant of the Ricardian model. Hence the model is sometimes referred to as the Ricardo-Viner model. The model’s name refers to its distinguishing feature—that one factor of production is assumed to be “specific” to a particular industry. A specific factor is one that is stuck in an industry or is immobile between industries in response to changes in market conditions for a number of reasons.
- 5.16: The Specific Factor Model
- 5.17: Dynamic Income Redistribution and Trade