The Heckscher-Ohlin Hypothesis

Abstract

The notion that a country’s comparative advantage (disadvantage) is determined by the relative abundance (scarcity) of factors of production was first mooted by Eli Heckscher in an article¹ published in 1919 where he concluded the following:

difference in the relative scarcity of the factors of production between one country and another is thus a necessary condition for a difference in comparative costs and consequently for international trade. A further indispensable condition is that the proportions in which the factors of production are combined shall not be the same for one commodity or for another. (p. 278)