L KarpInternational TradeNovember 23, 20074The Heckscher-Ohlin-Samuelson modelThis section presents the four basic theorems of the Heckscher-Ohlin-Samuelson (HOS) model:(i) the Factor Price Equalization theorem, (ii) the Stopler Samuelson theorem, (iIi) the Rybczyn-ski theorem, and (iv) the Heckscher-Ohlin theorem.The factor price equalization theoremgives conditions under which trade in commodities is a perfect substitute for the internationalmobility of factors. The Stopler-Samuelson theorem gives conditions under which a change inrelative commodity prices has an unambiguous effect on real factor returns.The Rybczynskitheorem shows how a change in factor supply alters production, holdingfixed all prices.Fi-nally, the Heckscher-Ohlin theorem shows the relation between relative factor endowments andcomparative advantage.Recall from chapter 1 that comparative advantage, and thus the direction of trade, dependson a comparison of relative prices in autarky. In the Ricardian model, autarky prices are com-pletely determined by technology; there a difference in technology between two countries isthe basis for trade. The HOS model provides an explanation for trade based on different factorendowments – in particular, a difference in relative factor endowments, rather than differenttechnology or different tastes, or something else.There is a single factor of production in the Ricardian model In the Ricardo-Viner modelthere is a single mobile factor of production, but sector-specific factors in each sector.In theHOS setting there are two or more mobile factors.We will consider the special case of thismodel where there are two commodities and two mobile factors of production, capital and la-bor.These factor move freely across sectors, so the wage rate and the rental rate must be thesame in both sectors, within a country. We emphasize the case where factors do not move fromone country to another, i.e. where there is no international labor migration or international in-vestment. The case where factors do move across national borders can be studied as a variationof the basic model.Wefirst discuss the assumptions about technology in the HOS model, and then present thefour theorems.79
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