The Discontinuous World Economy
Broadly two views of the impact of international trade on economic relations between nations have competed for acceptance. The standard Heckscher-Ohlin- Samuelson model, building on the comparative advantage foundation of Ricar- do, suggests that freer trade will lead to gains for all countries involved and a tendency to convergence in income and living standards. This last result is asserted in its strongest form in Samuelson’s (1948,1949) factor-price equalization theorem. For two countries, two homogeneous factors, and two commodities, producible by linearly homogeneous production functions exhibiting diminishing marginal productivity, and with both countries producing some of both goods competitively without transport costs or trade restrictions, then factor prices will be equalized across both countries.
KeywordsEurope Income Baran Expense Posit
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