Note sparse e grafici sul modello di Heckscher e Ohlin
Luca De Benedictis
Factor endowments
Physical definition
K
K
 
 
 L  Home  L  Foreign
Factor price definition
 w
 w
 
 
 r  Home  r  Foreign
Home is relatively capital-abundant (= labor-scarce)
Foreign is relatively labor-abundant (= capital-scarce)
Factor intensities
K K
   
 L Y  L  X
Good Y relatively capital-intensive
Good X is relatively labor-intensive
Endowments and production
possibilities
K
kH   
 L H
K
Y
kF
YH
EH
In autarky, the relative price
of the labor-intensive good
(X) is lower in the laborabundant country (Foreign).
 p A H
YF
EF
YH
YF
 p A F
XF
XH
Note: Here Y is more capitalintensive at all factor price ratios.
L
X
XH
XF
International equilibrium in the
Heckscher-Ohlin model
Y
p
YH
 p A H
YF
0
p*
ExHome
D
C
AF
AH
p*
 p A F
=C=D
ExForeign
( XC  X P )
X
XH
XF
Trade in the Heckscher-Ohlin
model
• The Heckscher-Ohlin theorem: A country
will export the commodity that intensively
uses its relatively abundant factor.
• The relatively labor-abundant country
exports labor services embodied in goods
and imports capital services embodied in
goods
Trade and factor prices in the
Heckscher-Ohlin model
Indirect exports of a factor
supply of the factor in the domestic market
domestic price of the factor
Indirect imports of a factor
supply of the factor in the domestic market
domestic price of the factor
Trade tends to make factor prices more similar
between trading countries
Product prices and factor prices
in the H-O model
Y
LY
OY
KX
A
pA
B
B
pB
X
B
A'
A
OX
A
LX
KY
Unit value isoquants and isocosts
K
in the H-O model
p X X  $1  wLX  rK X
kY k
H
$1 r
pY Y  $1  wLY  rKY
Y$1
kX
X $1
$1 w
wL  rK  $1
L
Some stylized facts about
economic trends since 1975
• Physical and political barriers to trade have
been significantly reduced in many countries
• Real wages (for unskilled labor) have
remained constant or even fallen in the North increased income inequalities there.
• Real wages have increased for large groups of
workers in the South (but not for all and large
variations between countries).
K
Factor price equalization
kY
Y$1Fa
Y$1Ha
kX
X $1Fa
X $1Ha
 Ha

*
 Fa
L
K
Limits to factor price
equalization
kY
kH
kX
H
kF '
F
L
How will a change in product
prices affect factor prices?
Y
LY
OY
KX
A
pA
B
B
pB
X
p

kX
B
A'
A
OX
and kY
A
LX
KY
Another look at how a change in
product prices affects factor prices
K
kYB
kYA
Y$1B
k XB
Y$1 A
k XA
X  $1  A
B
X  $1  B
A
L
How will a change in product
prices affect real wages?
w  p  MPL
w
 MPLX
pX
f K , L 
w
 MPLY
pY
r  p  MPK
r
 MPKX
pX
r
 MPKY
pY
B

f K, L

A
slope = MPK
K
The Stolper-Samuelson theorem
If there are constant returns to scale and both goods continue to be
produced, a relative increase in the price of a good will increase
the real return to the factor used intensively in that industry and
reduce the real return to the other factor.
In our example:
• there was a relative increase in the price of good X
• labor is used intensively in that sector
• in both sectors, the capital-intensity of production was raised
after the price change
w
 MPLX
pX
w
 MPLY
pY
and
r
 MPKX
pX
r
 MPKY
pY
The effect of changes in factor
endowments on output
Assume constant relative prices of goods
KX
OY '
OY
LY
Q'
Q
kX
kY
kY
OX
LX
KY
KY '
The Rybczynski theorem
If relative commodity prices are constant and if both commodities
continue to be produced, an increase in the supply of a factor will
lead to an increase in the output of the commodity using that
factor intensively and a decrease in the output of the other
commodity.
In our example:
• there was an increase in the supply of labor
• labor is used intensively in the production of good X
X
and Y