Heckscher-Ohlin Model
Trade driven by factor endowments, capital-rich countries export capital-intensive goods.
Definition
Trade from factor endowments with shared technology: countries export goods intensive in their abundant factor, capital-rich exports capital-intensive goods.
Key equation
H-O theorem + corollaries: factor-price equalization, Stolper-Samuelson, Rybczynski
The intuition
Trade is indirect factor exchange: Australia 'exports land' inside wheat, Bangladesh 'exports labor' inside garments. Prices of factors then converge across countries as if the factors themselves had migrated.
Exam tip
Empirics: cite Leontief's paradox (US exports were labor-intensive) as the classic H-O falsification and why technology differences rescue it.
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