Lecture notes
Lecture slides
- Module
- SESS0063 International trade
- Institution
- University College London (UCL)
Lecture slides of international trade module]
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Seller
Follow
Content preview
International TradeBA Course
UCL, SSEES
Lecture 4: The Heckscher-Ohlin Model
Idil Uz Akdogan
i.akdogan@ucl.ac.uk
,Introduction
1) Ricardo’s model:
• Labour is the only input of production.
• Comparative advantage results from labour productivity gaps.
• Trade enlarges both production and consumption frontiers.
2) Samuelson and Jones (SF model):
• Three inputs: Labour can move across industries, while Capital and Land are sector-s
• Trade results from country differences in resources abundance and relative intensity
• The specific factor model sheds light on the distribution of gains from trade between L
Capital, and Land.
3) Heckscher and Ohlin (HO model):
• Two inputs, both are mobile across sectors.
• Trade results from country differences in resources abundance and relative intensity o
(comparative advantage).
• HO’s factor-proportions model emphasizes the relationship between relative resource
availability and intensity, and trade.
, The Model’s Assumptions
1. Two countries: Home and Foreign.
2. Two goods: Cloth (C) and Food (F)
3. Two factors of production - Labour (L) and Capital (K) – are
substitutes and can be moved across sectors.
Unit Factor requirements in each sector:
4. While cloth production is labour-intensive, food is capital-intens
5. Countries have identical production technologies and consu
preferences but different endowments of resources.
6. The supply of Labour and Capital in each country is constant bu
across countries.
, Production Possibility Frontier
• With more than one factor of production, the opportunity cost in
production is no longer constant and the PPF is no longer a stra
line. Why?
• Numerical example:
K = 3000, total amount of capital available for production
L = 2000, total amount of labour available for production
• Suppose use a fixed mix of capital and labour in each sector.
aKC = 2, capital used to produce one yard of cloth
aLC = 2, labour used to produce one yard of cloth
aKF = 3, capital used to produce one calorie of food
aLF = 1, labour used to produce one calorie of food
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mdzubayerhossain. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £7.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67096 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now