The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Heckscher–Ohlin Trade Theory

  • Ronald W. Jones
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1116

Abstract

Heckscher–Ohlin trade theory consists of four principal theorems, viz. the Heckscher–Ohlin trade theorem whereby relatively capital-abundant countries export relatively capital-intensive commodities, the factor-price equalization theorem whereby trade in goods may serve to equalize wage rates between countries, the Stolper–Samuelson theorem whereby an increase in the price of the relatively labour- intensive commodity unambiguously improves the real wage rate, and the Rybczynski theorem stating that an increase in capital endowment by itself must cause some output to fall if prices are held constant. The article discusses the nature and fate of these theorems.

Keywords

Autarky Comparative advantage Dimensionality Distribution of income Factor- intensity reversal Factor-price equalization theorem Free trade General equilibrium Heckscher–Ohlin theorem Hecksher–Ohlin trade theory International trade theory Labour–capital ratio Leontief paradox Metzler tariff paradox New trade theory Reciprocity relationship Relative factor abundance Relative factor intensity Rybczynski theorem Specialization Stolper–Samuelson theorem Tariffs Terms of trade 

JEL Classifications

F1 
This is a preview of subscription content, log in to check access.

Bibliography

  1. Chang, W., W. Ethier, and M. Kemp. 1980. The theorems of international trade with joint production. Journal of International Economics 10: 377–394.CrossRefGoogle Scholar
  2. Chipman, J. 1966. A survey of the theory of international trade, Part 3. Econometrica 34: 18–76.CrossRefGoogle Scholar
  3. Chipman, J. 1969. Factor price equalization and the Stolper–Samuelson theorem. International Economic Review 10: 399–406.CrossRefGoogle Scholar
  4. Deardorff, A. 1980. The general validity of the law of comparative advantage. Journal of Political Economy 88: 941–957.CrossRefGoogle Scholar
  5. Deardorff, A. 1982. The general validity of the Heckscher–Ohlin theorem. American Economic Review 72: 683–694.Google Scholar
  6. Deardorff, A., and R. Stern, eds. 1994. The Stolper–Samuelson theorem: A golden jubilee. Ann Arbor: University of Michigan Press.Google Scholar
  7. Dixit, A., and V. Norman. 1980. Theory of international trade. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  8. Ethier, W. 1974. Some of the theorems of international trade with many goods and factors. Journal of International Economics 4: 199–206.CrossRefGoogle Scholar
  9. Ethier, W. 1984. Higher dimensional issues in trade theory. In Handbook of international economics, ed. R. Jones and P. Kenen, vol. 1. Amsterdam: North-Holland.Google Scholar
  10. Findlay, R. 1993. Wage dispersion, international trade and the services sector. In Trade, growth and development: The role of politics and institutions, ed. G. Hansson. London: Routledge.Google Scholar
  11. Findlay, R. 1995. Factor proportions and growth. Cambridge, MA: MIT Press.Google Scholar
  12. Flam, H., and M.J. Flanders, eds. 1991. Heckscher–Ohlin trade theory. Cambridge, MA: MIT Press.Google Scholar
  13. Gale, D., and H. Nikaido. 1965. The Jacobian matrix and the global univalence of mappings. Mathematische Annalen 159: 81–93.CrossRefGoogle Scholar
  14. Gruen, F., and W. Corden. 1970. A tariff that worsens the terms of trade. In Studies in international economics, ed. I. McDougall and R. Snape. Amsterdam: North-Holland.Google Scholar
  15. Heckscher, E. 1919. The effect of foreign trade on the distribution of income. Ekonomisk Tidskriff: 497–512. Translated as chapter 13 in American Economic Association, Readings in the theory of international trade. Philadelphia: Blakiston, 1949, and a new translation is provided in Flam and Flanders (1991).Google Scholar
  16. Jones, R. 1956. Factor proportions and the Heckscher–Ohlin theorem. Review of Economic Studies 24: 1–10.CrossRefGoogle Scholar
  17. Jones, R. 1965. The structure of simple general equilibrium models. Journal of Political Economy 73: 557–572.CrossRefGoogle Scholar
  18. Jones, R. 1971. A three-factor model in theory, trade, and history. In Trade, balance of payments, and growth, ed. J.N. Bhagwati et al. Amsterdam: North-Holland.Google Scholar
  19. Jones, R. 1974. The small country in a many-commodity world. Australian Economic Papers 13: 225–236.CrossRefGoogle Scholar
  20. Jones, R. 1985. Relative prices and real factor rewards: A reinterpretation. Economic Letters 19: 47–49.CrossRefGoogle Scholar
  21. Jones, R. 1992. Jointness in production and factor-price equalization. Review of International Economics 1: 10–18.CrossRefGoogle Scholar
  22. Jones, R. 2002. Heckscher–Ohlin trade models for the new century. In Bertil Ohlin: A centennial celebration (1899–1999), ed. R. Findlay, L. Jonung, and M. Lindahl. Cambridge, MA: MIT Press.Google Scholar
  23. Jones, R. 2003. Joint output and real wage rates. International Review of Economics and Finance 12: 513–516.CrossRefGoogle Scholar
  24. Jones, R. 2006a. Eli Heckscher and the holy trinity. In Eli Heckscher, international trade, and economic history, ed. R. Findlay et al. Cambridge, MA: MIT Press.Google Scholar
  25. Jones, R. 2006b. ‘Protection and real wages’: The history of an idea. Japanese Economic Review 57: 457–466.CrossRefGoogle Scholar
  26. Jones, R. 2007a. Key international trade theorems and large shocks. International Review of Economics and Finance.Google Scholar
  27. Jones, R. 2007b. Specific factors and Heckscher–Ohlin: An intertemporal blend. Singapore Economic Review 52: 1–6.CrossRefGoogle Scholar
  28. Jones, R., and S. Marjit. 1985. A simple production model with Stolper–Samuelson properties. International Economic Review 19: 565–567.CrossRefGoogle Scholar
  29. Jones, R., and S. Marjit. 1991. The Stolper–Samuelson theorem, the Leamer triangle, and the produced mobile factor structure. In Trade, policy, and international adjustments, ed. A. Takayama, M. Ohyama, and H. Otah. New York: Academic Press.Google Scholar
  30. Jones, R., and S. Marjit. 1992. International trade and endogenous production structures. In Economic theory and international trade: Essays in memoriam J. Trout Rader, ed. W. Neuefeind and R. Riezman. Berlin/New York: Springer-Verlag.Google Scholar
  31. Jones, R., and J. Scheinkman. 1977. The relevance of the two-sector production model in trade theory. Journal of Political Economy 85: 909–935.CrossRefGoogle Scholar
  32. Jones, R., S. Marjit, and T. Mitra. 1993. The Stolper–Samuelson theorem: Links to dominant diagonals. In General equilibrium, growth and trade II: Essays in honor of Lionel W. McKenzie, ed. R. Becker, R. Jones, and W. Thomson. New York: Academic Press.Google Scholar
  33. Jones, R., H. Beladi, and S. Marjit. 1999. The three faces of factor intensities. Journal of International Economics 48: 413–420.CrossRefGoogle Scholar
  34. Kemp, M., and L. Wegge. 1969. On the relation between commodity prices and factor rewards. International Economic Review 10: 407–413.CrossRefGoogle Scholar
  35. Krueger, A. 1977. Growth, distortion, and patterns of trade among many countries, Princeton studies in international finance, no. 40. Princeton: Princeton University Press.Google Scholar
  36. Leontief, W. 1953. Domestic production and foreign trade: The American capital position re-examined. Proceedings of the American Philosophical Society 97: 332–349.Google Scholar
  37. Lerner, A. 1933. Factor prices and international trade. Mimeo. Published in Economica 19 (1952): 1–15.Google Scholar
  38. Mas-Colell, A. 1979. Two propositions on the global univalence of systems of cost functions. In General equilibrium, growth, and trade, ed. J. Green and J. Scheinkman. New York: Academic Press.Google Scholar
  39. McKenzie, L. 1955. Equality of factor prices in world trade. Econometrica 23: 239–257.CrossRefGoogle Scholar
  40. Metzler, L. 1949. Tariffs, the terms of trade, and the distribution of national income. Journal of Political Economy 57: 1–29.CrossRefGoogle Scholar
  41. Minabe, N. 1966. The Heckscher–Ohlin theorem, the Leontief paradox, and patterns of economic growth. American Economic Review 56: 1193–1211.Google Scholar
  42. Mitra, T., and R. Jones. 1999. Factor shares and the Chipman condition. In Trade, welfare and econometrics: Essays in honor of John S. Chipman, ed. J. Melvin, J. Moore, and R. Riezman. New York: Routledge.Google Scholar
  43. Ohlin, B. 1933. Interregional and international trade. Cambridge, MA: Harvard University Press.Google Scholar
  44. Ruffin, R. 1988. The missing link: The Ricardian approach to the factor endowment theory of trade. American Economic Review 78: 759–772.Google Scholar
  45. Rybczynski, T.M. 1955. Factor endowments and relative commodity prices. Economica 22: 336–341.CrossRefGoogle Scholar
  46. Samuelson, P. 1948. International trade and the equalization of factor prices. Economic Journal 58: 163–184.CrossRefGoogle Scholar
  47. Samuelson, P. 1949. International factor-price equalization once again. Economic Journal 59: 181–197.CrossRefGoogle Scholar
  48. Samuelson, P. 1953. Prices of factors and goods in general equilibrium. Review of Economic Studies 21: 1–20.CrossRefGoogle Scholar
  49. Samuelson, P. 1971. Ohlin was right. Swedish Journal of Economics 73: 365–384.CrossRefGoogle Scholar
  50. Samuelson, P. 1992. Factor-price equalization by trade in joint and non-joint production. Review of International Economics 1: 1–9.CrossRefGoogle Scholar
  51. Stolper, W., and P. Samuelson. 1941. Protection and real wages. Review of Economic Studies 9: 58–73; also in Deardorff and Stern (1994).Google Scholar
  52. Uekawa, Y. 1971. Generalization of the Stolper–Samuelson theorem. Econometrica 39: 197–213.CrossRefGoogle Scholar
  53. Uekawa, Y. 1984. Some theorems of trade with joint production. Journal of International Economics 16: 319–333.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Ronald W. Jones
    • 1
  1. 1.