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.
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/9780262026567.003.0056
- Subject:
- Economics and Finance, Econometrics
This chapter reviews selected empirical investigations of the other basic propositions of the Heckscher–Ohlin (HO) model. These are the relationship between relative changes in product prices and ...
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This chapter reviews selected empirical investigations of the other basic propositions of the Heckscher–Ohlin (HO) model. These are the relationship between relative changes in product prices and relative changes in factor prices (Stolper–Samuelson effects); the relationship between changes in relative factor supplies and changes in the composition of output (Rybczynski effects), and the relationship between trade and the equalization of factor prices (factor price equalization effects).Less
This chapter reviews selected empirical investigations of the other basic propositions of the Heckscher–Ohlin (HO) model. These are the relationship between relative changes in product prices and relative changes in factor prices (Stolper–Samuelson effects); the relationship between changes in relative factor supplies and changes in the composition of output (Rybczynski effects), and the relationship between trade and the equalization of factor prices (factor price equalization effects).
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/9780262026567.003.0012
- Subject:
- Economics and Finance, Econometrics
This chapter surveys the development of the Heckscher–Ohlin (HO) trade theory. It discusses trade theory in the 1930s; the Heckscher–Ohlin–Samuelson (HOS) model; the Heckscher–Ohlin–Vanek (HOV) ...
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This chapter surveys the development of the Heckscher–Ohlin (HO) trade theory. It discusses trade theory in the 1930s; the Heckscher–Ohlin–Samuelson (HOS) model; the Heckscher–Ohlin–Vanek (HOV) model; the “new” trade theory and differentiated products; the Helpman non-factor price equalization model; and the Ohlin’s views on modern Heckscher–Ohlin trade models.Less
This chapter surveys the development of the Heckscher–Ohlin (HO) trade theory. It discusses trade theory in the 1930s; the Heckscher–Ohlin–Samuelson (HOS) model; the Heckscher–Ohlin–Vanek (HOV) model; the “new” trade theory and differentiated products; the Helpman non-factor price equalization model; and the Ohlin’s views on modern Heckscher–Ohlin trade models.
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.
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.
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/9780262026567.003.0043
- Subject:
- Economics and Finance, Econometrics
This chapter examines test results from the Heckscher–Ohlin (HO) proposition in a multi-factor, multi-country framework that began with Maskus (1985) and Bowen, Leamer, and Sveikauskas (1987) and ...
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This chapter examines test results from the Heckscher–Ohlin (HO) proposition in a multi-factor, multi-country framework that began with Maskus (1985) and Bowen, Leamer, and Sveikauskas (1987) and have continued to be carried out by Trefler (1993, 1995), Davis and Weinstein (2001), and others. It also considers empirical tests of the basic Heckscher–Ohlin–Vanek (HOV) relationship which states that the amount of a particular factor of production embodied in a country’s net trade of goods and services equals its endowment of this factor minus its share of world consumption times the world endowment of this factor. Among other topics covered are country-pair tests of the HO proposition and empirical investigations into the importance of intra-industry trade and increasing returns. The test of Helpman’s (1984) non-factor price equalization model undertaken by Choi and Krishna (2004) is also reviewed.Less
This chapter examines test results from the Heckscher–Ohlin (HO) proposition in a multi-factor, multi-country framework that began with Maskus (1985) and Bowen, Leamer, and Sveikauskas (1987) and have continued to be carried out by Trefler (1993, 1995), Davis and Weinstein (2001), and others. It also considers empirical tests of the basic Heckscher–Ohlin–Vanek (HOV) relationship which states that the amount of a particular factor of production embodied in a country’s net trade of goods and services equals its endowment of this factor minus its share of world consumption times the world endowment of this factor. Among other topics covered are country-pair tests of the HO proposition and empirical investigations into the importance of intra-industry trade and increasing returns. The test of Helpman’s (1984) non-factor price equalization model undertaken by Choi and Krishna (2004) is also reviewed.
Michael Szenberg, Lall Ramrattan, and Aron A. Gottesman (eds)
- Published in print:
- 2006
- Published Online:
- January 2009
- ISBN:
- 9780199298839
- eISBN:
- 9780191711480
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199298839.001.0001
- Subject:
- Economics and Finance, History of Economic Thought
This book presents the scientific works of Paul Samuelson, the leading neoclassical economist, which would attract research and study in the 21st century. The subject matter includes his ...
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This book presents the scientific works of Paul Samuelson, the leading neoclassical economist, which would attract research and study in the 21st century. The subject matter includes his ‘...scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science’, as identified by the Nobel Laureate Committee which conferred upon him the Nobel Prize in 1970. This book illustrates how Samuelson contributed to broad economic frameworks of the neoclassical synthesis, a mixed-economy, and the surrogate production function, which will continue to provide practitioners with a vision for research. The areas that have already stood up to scientific tests include: the factor price equalization theorem in trade, which will encounter tough economic problems ahead; examples of intergenerational problems; and areas which espouse the fundamentals of economic science, such as stability of equilibrium issues. The contents of this collection spreads over twenty-one chapters, covering a wide range of topics, including general equilibrium, finance, trade, Keynesian economics, and other sub-disciplines, which are pulled together in the introduction from a methodological point of view.Less
This book presents the scientific works of Paul Samuelson, the leading neoclassical economist, which would attract research and study in the 21st century. The subject matter includes his ‘...scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science’, as identified by the Nobel Laureate Committee which conferred upon him the Nobel Prize in 1970. This book illustrates how Samuelson contributed to broad economic frameworks of the neoclassical synthesis, a mixed-economy, and the surrogate production function, which will continue to provide practitioners with a vision for research. The areas that have already stood up to scientific tests include: the factor price equalization theorem in trade, which will encounter tough economic problems ahead; examples of intergenerational problems; and areas which espouse the fundamentals of economic science, such as stability of equilibrium issues. The contents of this collection spreads over twenty-one chapters, covering a wide range of topics, including general equilibrium, finance, trade, Keynesian economics, and other sub-disciplines, which are pulled together in the introduction from a methodological point of view.
Arvind Panagariya
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9780199680405
- eISBN:
- 9780191760266
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199680405.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Development, Growth, and Environmental
Arvind Panagariya analyses the Ricardian theory of comparative advantage and its reformulation in the leading modern theory of international trade, Heckscher-Ohlin. He examines the logic of ...
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Arvind Panagariya analyses the Ricardian theory of comparative advantage and its reformulation in the leading modern theory of international trade, Heckscher-Ohlin. He examines the logic of comparative advantage, demonstrating that if a country specializes in the good that it produces relatively more efficiently and trades it for the good it produces relatively inefficiently, it will benefit, as well as the proposition that free trade will leave both countries at least as well off as in its absence. The core concept of comparative advantage has formed the basis for much modern trade theory, notably the influential Heckscher-Ohlin model. Panagariya examines the central finding of the model, which is that each country exports the good that uses its abundant factor more intensively and imports the good that uses its scarce factor more intensively, as well as the key theorems (Stolper-Samuelson, Rybczynski, and Factor Price Equalization) derived from the basic framework.Less
Arvind Panagariya analyses the Ricardian theory of comparative advantage and its reformulation in the leading modern theory of international trade, Heckscher-Ohlin. He examines the logic of comparative advantage, demonstrating that if a country specializes in the good that it produces relatively more efficiently and trades it for the good it produces relatively inefficiently, it will benefit, as well as the proposition that free trade will leave both countries at least as well off as in its absence. The core concept of comparative advantage has formed the basis for much modern trade theory, notably the influential Heckscher-Ohlin model. Panagariya examines the central finding of the model, which is that each country exports the good that uses its abundant factor more intensively and imports the good that uses its scarce factor more intensively, as well as the key theorems (Stolper-Samuelson, Rybczynski, and Factor Price Equalization) derived from the basic framework.
