Answer to Question #293946 in Macroeconomics for Safir ul rehman

Question

What were the results of empirical tests on the relationship between human capital and international

trade? Natural resources and international trade?

What is the status of the H–O theory today?

Answer 1

Solution:

The Heckscher-Ohlin theory is referred to as the modern theory of international trade. Heckscher, a Swedish economist, first proposed it in 1919, and his student Ohlin expanded on it in 1935. Heckscher-Ohlin theory, also known as the factor endowments theory of international trade, argues that international trade is simply a subset of inter-local or inter-regional trade and that there is no need for a separate theory of international trade.

It emphasizes that differences in factor endowments, rather than differences in factor efficiency, are the true basis of international trade, as opposed to differences in factor efficiency as maintained by classical theory.

Heckscher-Ohlin theory, in economics, is a theory of comparative advantage in international trade that states that countries with relatively abundant capital and relatively scarce labor will tend to export capital-intensive products and import labor-intensive products, whereas countries with relatively scarce labor will tend to export labor-intensive products and import capital-intensive products.

The Heckscher-Ohlin theory holds that the amount of capital per worker is more important than the total amount of capital.

 

The Heckscher-Ohlin model is an economic theory that states that countries should export what they can produce most efficiently and abundantly. The model emphasizes the export of goods that require production factors that a country already has in abundance. It also emphasizes the import of goods that a country cannot produce as efficiently as it should. It holds that countries should ideally export materials and resources that they have an excess of while importing those resources that they require in proportion.

 

The Heckscher-Ohlin model was the foundation of international trade theory and is still widely accepted today. Due to the increased ability to transfer knowledge/production technologies between countries, the H-O model more accurately describes international trade patterns in modern times, focusing primarily on factorial differences such as labor force and resource allocation as to why countries trade with each other.