An Inframarginal Analysis of the Heckscher-Olin Model

2017-06-06T02:42:13Z (GMT) by Yang, Xiaokai Cheng, Wenli
In the paper we check if the four core theorems of trade, the Heckscher-Olin (HO) theorem, the Stopler-Samuelson theorem, the Rybczynski theorem, and factor equalization theorem, hold in a general equilibrium analysis with endogenous prices of goods and factors and if they hold when all trade patterns outside the diversification cone and discontinuous jumps of general equilibrium between different trade patterns are considered. Also, comparative advantage in technology between countries is added to comparative advantage in endowments to accommodate empirical evidences that are incompatible with the core theorems. The HO theorem can stand the test though it needs to be refined when technical comparative advantage is introduced. The other core theorems cannot stand the test.