The_Heckscher-Ohlin_Model__Lesson_24_

# The_Heckscher-Ohlin_Model__Lesson_24_ - Proof of...

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1 Lesson 24 1 Proof of Heckscher-Ohlin 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 general-equilibrium supply curve for an economy with increasing opportunity cost (as in the H-O model) is upward-sloping

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2 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.

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The_Heckscher-Ohlin_Model__Lesson_24_ - Proof of...

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