Robert E. Baldwin
- Published in print:
- 2008
- Published Online:
- August 2013
- ISBN:
- 9780262026567
- eISBN:
- 9780262267656
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262026567.001.0001
- Subject:
- Economics and Finance, Econometrics
No names are more closely associated with modern trade theory than Eli Heckscher and Bertil Ohlin. The basic Heckscher–Ohlin proposition, according to which a country exports factors in abundant ...
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No names are more closely associated with modern trade theory than Eli Heckscher and Bertil Ohlin. The basic Heckscher–Ohlin proposition, according to which a country exports factors in abundant supply and imports factors in scarce supply, is a key component of modern trade theory. This book traces the development of the HO model, describing the historical twists and turns that have led to the basic modern theoretical model in use today. It not only presents a cohesive view of the model’s evolution but also reviews the results of empirical tests its various versions. The book surveys the development of the HO model and then assesses empirical tests of its predictions. Most discussions of empirical work on HO models confine themselves to the basic theorem, but the book devotes a chapter to empirical tests of three related propositions: the Stolper–Samuelson theorem; the Rybczynski theorem; and the factor price equalization theorem. It concludes that although the formulation and testing of these later models have improved economists’ understanding of the forces shaping international trade, many empirical trade economists (himself included) were so enamored of the elegant but highly unrealistic factor price equalization models developed from the insights of Heckscher and Ohlin that they have neglected investigation of other models without this relationship.Less
No names are more closely associated with modern trade theory than Eli Heckscher and Bertil Ohlin. The basic Heckscher–Ohlin proposition, according to which a country exports factors in abundant supply and imports factors in scarce supply, is a key component of modern trade theory. This book traces the development of the HO model, describing the historical twists and turns that have led to the basic modern theoretical model in use today. It not only presents a cohesive view of the model’s evolution but also reviews the results of empirical tests its various versions. The book surveys the development of the HO model and then assesses empirical tests of its predictions. Most discussions of empirical work on HO models confine themselves to the basic theorem, but the book devotes a chapter to empirical tests of three related propositions: the Stolper–Samuelson theorem; the Rybczynski theorem; and the factor price equalization theorem. It concludes that although the formulation and testing of these later models have improved economists’ understanding of the forces shaping international trade, many empirical trade economists (himself included) were so enamored of the elegant but highly unrealistic factor price equalization models developed from the insights of Heckscher and Ohlin that they have neglected investigation of other models without this relationship.
Rachel McCulloch
- Published in print:
- 2006
- Published Online:
- January 2009
- ISBN:
- 9780199298839
- eISBN:
- 9780191711480
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199298839.003.0016
- Subject:
- Economics and Finance, History of Economic Thought
This chapter examines the Stolper–Samuelson's Theorem under varying conditions and assumptions. Using a previous reformulation of the theorem, it demonstrates that when the relative prices for ...
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This chapter examines the Stolper–Samuelson's Theorem under varying conditions and assumptions. Using a previous reformulation of the theorem, it demonstrates that when the relative prices for labor-intensive goods fall, real wages decline in that sector, and the returns to other factors increase, resulting in a redistribution effect. The model had been robust in its predictions. When the number of goods and factors is increased, at least one factor is likely to gain or lose. The model is relevant for modern policies such as the Trade Adjustment Assistance and Unemployment Insurance Programs that assist distressed industries, where compensation can make a difference for individuals or firms that are hurt from free trade. The model is also relevant in the political arena where owners of factors vote or lobby. It has shown strength in explaining patterns of protection across countries.Less
This chapter examines the Stolper–Samuelson's Theorem under varying conditions and assumptions. Using a previous reformulation of the theorem, it demonstrates that when the relative prices for labor-intensive goods fall, real wages decline in that sector, and the returns to other factors increase, resulting in a redistribution effect. The model had been robust in its predictions. When the number of goods and factors is increased, at least one factor is likely to gain or lose. The model is relevant for modern policies such as the Trade Adjustment Assistance and Unemployment Insurance Programs that assist distressed industries, where compensation can make a difference for individuals or firms that are hurt from free trade. The model is also relevant in the political arena where owners of factors vote or lobby. It has shown strength in explaining patterns of protection across countries.
Kenneth Rogoff
- Published in print:
- 2006
- Published Online:
- January 2009
- ISBN:
- 9780199298839
- eISBN:
- 9780191711480
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199298839.003.0015
- Subject:
- Economics and Finance, History of Economic Thought
This chapter evaluates Samuelson's trade contributions such as the Stolper–Samuelson and factor-prices equalization theorems, as vital in today's globalization debate. The ideas that gain from trade ...
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This chapter evaluates Samuelson's trade contributions such as the Stolper–Samuelson and factor-prices equalization theorems, as vital in today's globalization debate. The ideas that gain from trade can be modeled through side-payment, that Samuelson added intuitive understanding and easy testing of the Stolper–Samuelson Theory, and that the simple ‘iceberg-cost’ metaphor helped our understanding of transit cost and friction in trade, are very active in the modern scientific and development views of modern trade theory. This chapter spans a wide range of thought from the ‘iceberg-cost’ concepts to a Ricardian ‘continuum of goods’ trade model. In between are financial analysis models, such as the Harrod–Balassa–Samuelson Theorem, according to which the exchange rate increases faster for growing countries, and which has led to the development of the Heston–Summer database for world comparison of income and prices. The chapter also presents a contribution to the transfer problem.Less
This chapter evaluates Samuelson's trade contributions such as the Stolper–Samuelson and factor-prices equalization theorems, as vital in today's globalization debate. The ideas that gain from trade can be modeled through side-payment, that Samuelson added intuitive understanding and easy testing of the Stolper–Samuelson Theory, and that the simple ‘iceberg-cost’ metaphor helped our understanding of transit cost and friction in trade, are very active in the modern scientific and development views of modern trade theory. This chapter spans a wide range of thought from the ‘iceberg-cost’ concepts to a Ricardian ‘continuum of goods’ trade model. In between are financial analysis models, such as the Harrod–Balassa–Samuelson Theorem, according to which the exchange rate increases faster for growing countries, and which has led to the development of the Heston–Summer database for world comparison of income and prices. The chapter also presents a contribution to the transfer problem.
Avinash Dixit
- Published in print:
- 2006
- Published Online:
- January 2009
- ISBN:
- 9780199298839
- eISBN:
- 9780191711480
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199298839.003.0014
- Subject:
- Economics and Finance, History of Economic Thought
This chapter provides an appraisal of Samuelson's work on trade theory. It explains the scientific importance of starting with the Ricardian 2x2 model and the current literature on comparative ...
More
This chapter provides an appraisal of Samuelson's work on trade theory. It explains the scientific importance of starting with the Ricardian 2x2 model and the current literature on comparative advantage. Samuelson rests this model on the shoulders of giants, whether we want to explain gains from trade by swapping bananas for steel, or from the modern theoretical points of view. Samuelson has picked up this model without any rigorous proof and has given it many ‘operational’ assumptions so that one can test — or falsify — its predictive or explanatory powers. Proof of this model led to the welfare gain concept that Samuelson advanced from the classics, and anchored squarely on the First and Second Welfare Theorems. With these theories, trade can now be modeled to assess who gains, for instance, in the formation of a free trade agreement. This kind of research has only just begun.Less
This chapter provides an appraisal of Samuelson's work on trade theory. It explains the scientific importance of starting with the Ricardian 2x2 model and the current literature on comparative advantage. Samuelson rests this model on the shoulders of giants, whether we want to explain gains from trade by swapping bananas for steel, or from the modern theoretical points of view. Samuelson has picked up this model without any rigorous proof and has given it many ‘operational’ assumptions so that one can test — or falsify — its predictive or explanatory powers. Proof of this model led to the welfare gain concept that Samuelson advanced from the classics, and anchored squarely on the First and Second Welfare Theorems. With these theories, trade can now be modeled to assess who gains, for instance, in the formation of a free trade agreement. This kind of research has only just begun.
Michael Szenberg, Lall Ramrattan, Aron A. Gottesman, and Kenneth J. Arrow
- Published in print:
- 2006
- Published Online:
- January 2009
- ISBN:
- 9780199298839
- eISBN:
- 9780191711480
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199298839.003.0001
- Subject:
- Economics and Finance, History of Economic Thought
This introductory chapter looks at the various ways in which Paul Samuelson was appraised by the contributors. The features that stand out bear close correspondence with scientific, mathematical ...
More
This introductory chapter looks at the various ways in which Paul Samuelson was appraised by the contributors. The features that stand out bear close correspondence with scientific, mathematical techniques, and the genius of a craftsman. Paradigm, scientific research program, anthology, and epistemological viewpoints can be read into the program. Samuelson is renowned as one who puts heavy weight on reality in his mathematical models, exhibiting great regards for facts. He has been presented as a leader in the neoclassical framework, building models that share constant assumptions, dependent and independent variables with various laws that put the models into motion. The area of international trade is a solid example of the fruits of his research, where the theory of factor price equalization and the Stolper–Samuelson Theorem are now textbook paradigms. The Cambridge Controversy on the theory of capital came alive through Samuelson's surrogate production function. Samuelson is also responsible for introducing Keynes to the practitioners of economics through his neoclassical synthesis.Less
This introductory chapter looks at the various ways in which Paul Samuelson was appraised by the contributors. The features that stand out bear close correspondence with scientific, mathematical techniques, and the genius of a craftsman. Paradigm, scientific research program, anthology, and epistemological viewpoints can be read into the program. Samuelson is renowned as one who puts heavy weight on reality in his mathematical models, exhibiting great regards for facts. He has been presented as a leader in the neoclassical framework, building models that share constant assumptions, dependent and independent variables with various laws that put the models into motion. The area of international trade is a solid example of the fruits of his research, where the theory of factor price equalization and the Stolper–Samuelson Theorem are now textbook paradigms. The Cambridge Controversy on the theory of capital came alive through Samuelson's surrogate production function. Samuelson is also responsible for introducing Keynes to the practitioners of economics through his neoclassical synthesis.
Robert E. Baldwin
- Published in print:
- 2008
- Published Online:
- August 2013
- ISBN:
- 9780262026567
- eISBN:
- 9780262267656
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262026567.003.0009
- Subject:
- Economics and Finance, Econometrics
This introductory chapter begins with a discussion of the Heckscher–Ohlin (HO) proposition. It then sets out the book’s purpose, which is to review both the theoretical development of the basic ...
More
This introductory chapter begins with a discussion of the Heckscher–Ohlin (HO) proposition. It then sets out the book’s purpose, which is to review both the theoretical development of the basic insights of Heckscher and Ohlin into the modern factor-content trade model and the results of empirical tests of HO models. It devotes particular attention to examining the extent to which the factor-content version of the HO proposition is supported in these empirical tests. It also examines the results from investigating other predictions of HO models, in particular, the search for Stolper–Samuelson, Rybczynski, and factor price equalization effects. An overview of the subsequent chapters is also presented.Less
This introductory chapter begins with a discussion of the Heckscher–Ohlin (HO) proposition. It then sets out the book’s purpose, which is to review both the theoretical development of the basic insights of Heckscher and Ohlin into the modern factor-content trade model and the results of empirical tests of HO models. It devotes particular attention to examining the extent to which the factor-content version of the HO proposition is supported in these empirical tests. It also examines the results from investigating other predictions of HO models, in particular, the search for Stolper–Samuelson, Rybczynski, and factor price equalization effects. An overview of the subsequent chapters is also presented.
