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A Geometric Comparison of the Transformation Loci with Specific and Mobile Capital

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  • John Gilbert
  • Reza Oladi

Abstract

The authors show how the transformation loci in the specific factors model (capital specificity) and the Heckscher-Ohlin-Samuelson model (capital mobility) can be rigorously derived and easily compared by using geometric techniques on the basis of Savosnick geometry. The approach shows directly that the transformation locus with capital specificity has a greater degree of curvature than with capital mobility, given the same technology, and that the latter is an envelope of the former. It can also be used to show how incentives in the short run would lead to the long-run capital reallocation implied by the assumption of capital mobility.

Suggested Citation

  • John Gilbert & Reza Oladi, 2008. "A Geometric Comparison of the Transformation Loci with Specific and Mobile Capital," The Journal of Economic Education, Taylor & Francis Journals, vol. 39(2), pages 145-152, April.
    • Handle: RePEc:taf:jeduce:v:39:y:2008:i:2:p:145-152
    DOI: 10.3200/JECE.39.2.145-152
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    Cited by:

    1. Omer GOKCEKUS & Kevin BENGYAK, 2015. "Learning Heckscher-Ohlin Model in Five Easy Steps," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 137-143, March.

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