L Karp
International Trade
November 23, 2007
4
The Heckscher-Ohlin-Samuelson model
This 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 theorem
gives conditions under which trade in commodities is a perfect substitute for the international
mobility of factors. The Stopler-Samuelson theorem gives conditions under which a change in
relative commodity prices has an unambiguous effect on real factor returns.
The Rybczynski
theorem shows how a change in factor supply alters production, holding
fi
xed all prices.
Fi-
nally, the Heckscher-Ohlin theorem shows the relation between relative factor endowments and
comparative advantage.
Recall from chapter 1 that comparative advantage, and thus the direction of trade, depends
on 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 is
the basis for trade. The HOS model provides an explanation for trade based on different factor
endowments – in particular, a difference in relative factor endowments, rather than different
technology or different tastes, or something else.
There is a single factor of production in the Ricardian model In the Ricardo-Viner model
there is a single mobile factor of production, but sector-speci
fi
c factors in each sector.
In the
HOS setting there are two or more mobile factors.
We will consider the special case of this
model 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 the
same in both sectors, within a country. We emphasize the case where factors do not move from
one 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 variation
of the basic model.
We
fi
rst discuss the assumptions about technology in the HOS model, and then present the
four theorems.
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