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Heterogeneous Capital and the Heckscher-Ohlin-Samuelson Theory of Trade

In: Fundamental Issues in Trade Theory

Author

Listed:
  • J. S. Metcalfe
  • Ian Steedman

Abstract

While many objections have been raised as to the validity of the assumptions underlying the Heckscher-Ohlin-Samuelson theory of trade, that theory is widely regarded as immune from criticism of its internal logic, once the assumptions are granted. If the theory is to be useful in the understanding of real world trade, however, the assumption that each country has a given endowment of capital must be interpreted in such a way that the heterogeneity of capital goods can be allowed for. Such an interpretation is indeed possible but it immediately raises doubts as to whether recent results from the controversy over capital theory might not show the internal logic of the HOS analysis to be open to criticism. The object of the essay is to suggest that the existence of heterogeneous capital goods does lead to a breakdown of the logic of the HOS theory and hence to that of its major conclusions.

Suggested Citation

  • J. S. Metcalfe & Ian Steedman, 1979. "Heterogeneous Capital and the Heckscher-Ohlin-Samuelson Theory of Trade," Palgrave Macmillan Books, in: Ian Steedman (ed.), Fundamental Issues in Trade Theory, chapter 5, pages 64-76, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-04378-1_5
    DOI: 10.1007/978-1-349-04378-1_5
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    Cited by:

    1. Theodore Mariolis & Lefteris Tsoulfidis, 2018. "Less Is More: Capital Theory And Almost Irregular-Uncontrollable Actual Economies," Contributions to Political Economy, Cambridge Political Economy Society, vol. 37(1), pages 65-88.
    2. Mariolis, Theodore & Tsoulfidis, Lefteris, 2010. "Eigenvalue distribution and the production price-profit rate relationship in linear single-product systems: theory and empirical evidence," MPRA Paper 43716, University Library of Munich, Germany.

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