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Implications of Many Industries in the Heckscher-Ohlin Model

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  • Choi, E. Kwan

Abstract

This paper examines the implications of many industries on the Heckscher-Ohlin (HO) model. Available empirical studies suggest that output prices are interdependent. When output prices are interdependent, the HO Theorem obtained in the 2 * 2 case generally does not hold in the multi-commodity world. It is shown that mean Stolper-Samuelson elasticities as well as the mean Rybcyznski effects would become negligible as the number of industries increases. Due to output indeterminacy, exports of a capital-abundant country need not be more capital intensive than imports. Leontief's two empirical studies on U.S. trade patterns were invalid tests of the HO predictions that were derived from the 2 * 2 model. Thus, the so-called Leontief Paradox may be commonly observed. The main results of the 2 * 2 HO model are peculiarities that have little relevance to the real world with many industries.

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  • Choi, E. Kwan, 2003. "Implications of Many Industries in the Heckscher-Ohlin Model," Staff General Research Papers Archive 11379, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:11379
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    Cited by:

    1. Choi, E. Kwan, 2004. "Aid allocation and the transfer paradox in small open economies," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 245-251.
    2. Choi, E. Kwan, 2008. "Factor growth and equalized factor prices," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 517-528, October.
    3. Demmou Lilas, 2009. "Déterminants et nature des spécialisations Nord-Sud : quelques enseignements tirés de la littérature empirique," Revue d'économie politique, Dalloz, vol. 119(1), pages 71-94.
    4. Choi, E. Kwan, 2011. "To integrate with a high- or low-wage country: That is the question," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 792-799, October.
    5. Levkovych, Inna, 2011. "Der ukrainische Außenhandel mit Produkten der Agrar- und Ernährungswirtschaft: Eine quantitative Analyse aus Sicht traditioneller und neuer Außenhandelstheorien," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 59, number 109520.
    6. Mr. Eun K Choi, 2005. "Infrastructure Aid, Deindustrialization, and Welfare," IMF Working Papers 2005/150, International Monetary Fund.

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