The_Heckscher-Ohlin_Model__Lesson_20_ - Contrasting the H-O...

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1 Lesson 20 1 Contrasting the H-O model with the Ricardian model Why do we use a variety of models? Can different models both be “right?” Lesson 20 2 The Ricardian model is useful for explaining the idea of comparative advantage and illustrating the gains from trade in a framework without a lot of bells and whistles… …but it has a number of shortcomings Lesson 20 3 All workers are identical in the Ricardian model, so all benefit from trade This just doesn’t “feel” right In contrast, the Stolper-Samuelson theorem developed in context of the H-O model explicitly deals with the issue of heterogeneous experience…trade is harmful to some even while it is beneficial to others
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2 Lesson 20 4 In the Ricardian world, trade causes at least one country (maybe both) to specialize in production This result contradicts casual observation that many countries (the United States, Japan, the countries of Western Europe) remain fully diversified even while engaging in significant trade with one
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This note was uploaded on 09/14/2009 for the course ECON 340 taught by Professor Leidholm during the Summer '08 term at Michigan State University.

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The_Heckscher-Ohlin_Model__Lesson_20_ - Contrasting the H-O...

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