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Lesson 24
1
Proof of HeckscherOhlin theorem
In this lesson, we “prove” the Heckscher
Ohlin theorem
The “proof” is by way of example, and is
therefore not completely general
Generalization requires more advanced
mathematical techniques
Lesson 24
2
Proof follows on the heels of the
Rybczynski theorem
Basically, we first show how changes in
factor supplies affect the general
equilibrium supply curve of an economy
We then interpret the result to fit two
countries
Lesson 24
3
Recall that the generalequilibrium supply
curve for an economy with increasing
opportunity cost (as in the HO model) is
upwardsloping
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Lesson 24
4
X
Q
X
Y
P
P
X
S
Lesson 24
5
The Rybczynski theorem says that, holding
relative price constant, an increase in
capital (for example) will increase the
amount of the capital intensive good
produced and reduce the amount of the
labor intensive good produced
Lesson 24
6
Suppose to start that good
X
is capital
intensive
Chose any arbitrary price, and draw a
horizontal line over to the supply curve
An increase in capital means that there is a
new production point on a new supply
curve
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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.
 Summer '08
 leidholm
 Economics

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