Heckscher-Ohlin Model and International Trade

What does Factor Price Insensitivity (Leamer, 1995) in the H-O model highlight?

The complex relationship between factor prices and factor endowments

What is one of the main questions the H-O model aims to answer?

What are the equilibrium factor prices?

According to the H-O model, what happens when Factor Intensity Reversals (FIRs) occur?

The factor intensity rankings of goods change with changing factor prices

In the H-O model, what is assumed to be equalized across countries due to free trade?

Prices (p1, p2) Signup and view all the answers

Which concept in the H-O model asserts that factor endowments have no direct impact on determining factor prices?

Factor Price Insensitivity Signup and view all the answers

What effect does a steeper slope of the PPF relative to the relative price have in the H-O model?

Increases relative abundance of labor over capital Signup and view all the answers

Which condition in the H-O model ensures that there is no involuntary unemployment or underutilization of labor and capital?

Equilibrium Production Condition Signup and view all the answers

What is one of the outcomes when FIRs occur in the H-O model?

'Factor Price Equalization' fails to hold true Signup and view all the answers

'Resources are limited' in the context of the H-O model implies what?

'Factor endowments are fixed' Signup and view all the answers

'FOC implies Equilibrium production occurs where the slope of the PPF equals the relative price' in the H-O model. What does FOC stand for?

'First-Order Condition' Signup and view all the answers

According to the Factor Price Equalization (FPE) theorem, under what conditions do factor prices become equal between two countries in free trade?

Both goods are produced in both countries without any Foreign Direct Investment (FDI). Signup and view all the answers

What does the Stolper-Samuelson Theorem suggest regarding the effect of an increase in the relative price of a good on factor returns?

It increases the real return to the factor used intensively in the production of that good. Signup and view all the answers

Which theorem predicts that an increase in a factor endowment will lead to an increase in output for the industry using that factor intensively?

Rybczynski Signup and view all the answers

In a perfect specialization scenario according to the Heckscher-Ohlin (H-O) Model, what does each country export?

The good using its abundant factor intensively. Signup and view all the answers

What is one of the factors that contribute to observed deviations from Factor Price Equalization (FPE) in practice?

Market imperfections and factor mobility constraints. Signup and view all the answers

Which theory suggests that not everyone gains from trade when there is an increase in the relative price of a good?

Stolper-Samuelson Theorem Signup and view all the answers

What does Leontief's paradox attempt to explain regarding international trade patterns?

'Heckscher-Ohlin' model predictions compared to actual trade data. Signup and view all the answers

'Dutch disease' can be linked to which theorem based on the text provided?

'Rybczynski Theorem' Signup and view all the answers

'Leontief's paradox' is explained by factors such as:

'Protectionism' and 'tech differences.' Signup and view all the answers

'Empirical tests of the H-O Model' require data related to:

'Trade,' 'endowments,' and 'technology.' Signup and view all the answers

What is one reason countries trade according to the text?

Due to differences in endowments Signup and view all the answers

In the specific factors model, why does China export textiles according to the text?

Due to abundant labor supply Signup and view all the answers

Why does Germany export machinery according to the text?

Due to a lack of capital Signup and view all the answers

What does the H-O model show about trade patterns?

Trade is due to both resource endowments and differences in factor abundance Signup and view all the answers

What determines the trade pattern in the H-O model?

Differences in factor abundance and factor intensity Signup and view all the answers

How does Samuelson contribute to the trade model discussed?

He formalized the model developed by Heckscher and Ohlin Signup and view all the answers