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Heckscher–Ohlin and Specific-Factors Trade Models for Finite Changes: How Different Are They?

In: International Trade Theory and Competitive Models Features, Values, and Criticisms

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  • Ronald W. Jones

Abstract

In competitive international trade theory, two of the basic models are the Specific-Factors model and the Heckscher–Ohlin model, with dimensionality 3 × 2 and 2 × 2, respectively. A surprising result in Heckscher–Ohlin is that the effect on factor prices of an infinitesimal change in a commodity price depends neither on the importance of the industry nor on the differences between sectors in the flexibility of technology. For finite price changes, this need no longer be the case, and the model form itself may change endogenously as production patterns get altered. Furthermore, the extent of the response of the wage rate to a price increase in the more labor-intensive commodity becomes less severe the greater is the discrepancy between the degree of labor-intensity difference between sectors in the Heckscher–Ohlin model but more severe in the Specific-Factors model.

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  • Ronald W. Jones, 2018. "Heckscher–Ohlin and Specific-Factors Trade Models for Finite Changes: How Different Are They?," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 8, pages 117-136, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813200678_0008
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    1. Jones, Ronald W & Marjit, Sugata, 1985. "A Simple Production Model with Stolper-Samuelson Properties," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 565-567, October.
    2. Jones, Ronald W., 1975. "Income distribution and effective protection in a multicommodity trade model," Journal of Economic Theory, Elsevier, vol. 11(1), pages 1-15, August.
    3. Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-967, Sept./Oct.
    4. Jones, Ronald W., 2008. "Key international trade theorems and large shocks," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 103-112.
    5. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    6. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 9(1), pages 58-73.
    7. Kalyan K. Sanyal & Ronald W. Jones, 2018. "The Theory of Trade in Middle Products," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 13, pages 203-231, World Scientific Publishing Co. Pte. Ltd..
    8. Jones, R.W. & Marjit, S., 1992. "International Trade and Endogenous Production Structures," RCER Working Papers 312, University of Rochester - Center for Economic Research (RCER).
    9. Jones, Ronald W, 1974. "The Small Country in a Many-Commodity World," Australian Economic Papers, Wiley Blackwell, vol. 13(23), pages 225-236, December.
    10. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
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    Cited by:

    1. Sugata Marjit & Kausik Gupta, 2023. "Inward‐looking policies, finite change, and employment: The capital reallocation effect," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 62-76, March.
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    4. Sugata Marjit & Kausik Gupta, 2020. "Inward Looking Policies, Finite Change and Employment - The Capital Reallocation Effect," CESifo Working Paper Series 8730, CESifo.
    5. Eden S. H. Yu & Chi‐Chur Chao, 2021. "Appropriation, firm dynamics, and wage inequality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 118-129, March.

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    More about this item

    Keywords

    International Trade Theory; Models; Competitive Markets;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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