THE HECKSCHER-OHLIN MODEL IN THEORY AND PRACTICE

[Pages:60]PRINCETON STUDIES IN INTERNATIONAL FINANCE No. 77, February 1995

THE HECKSCHER-OHLIN MODEL IN THEORY AND PRACTICE

EDWARD E. LEAMER

INTERNATIONAL FINANCE SECTION

DEPARTMENT OF ECONOMICS PRINCETON UNIVERSITY

PRINCETON, NEW JERSEY

PRINCETON STUDIES IN INTERNATIONAL FINANCE

PRINCETON STUDIES IN INTERNATIONAL FINANCE are published by the International Finance Section of the Department of Economics of Princeton University. Although the Section sponsors the Studies, the authors are free to develop their topics as they wish. The Section welcomes the submission of manuscripts for publication in this and its other series. Please see the Notice to Contributors at the back of this Study.

The author of this Study, Edward E. Leamer, is Professor of Economics and Chauncey J. Medberry Professor of Management at the John E. Anderson Graduate School of Management at the University of California, Los Angeles. He is a Fellow of the American Academy of Arts and Sciences and of the Econometric Society and is a Research Associate of the National Bureau of Economic Research. Professor Leamer has published several books and numerous articles in the fields of econometrics and international economics. His most recent book is Sturdy Econometrics: Selected Essays of Edward E. Leamer (1994). This Study was presented as the Frank D. Graham Memorial Lecture on March 3, 1994. A complete list of Graham Memorial Lecturers is given at the end of this volume.

PETER B. KENEN, Director International Finance Section

PRINCETON STUDIES IN INTERNATIONAL FINANCE No. 77, February 1995

THE HECKSCHER-OHLIN MODEL IN THEORY AND PRACTICE

EDWARD E. LEAMER

INTERNATIONAL FINANCE SECTION

DEPARTMENT OF ECONOMICS PRINCETON UNIVERSITY

PRINCETON, NEW JERSEY

INTERNATIONAL FINANCE SECTION EDITORIAL STAFF

Peter B. Kenen, Director Margaret B. Riccardi, Editor Lillian Spais, Editorial Aide Lalitha H. Chandra, Subscriptions and Orders

Library of Congress Cataloging-in-Publication Data

Leamer, Edward E.

The Heckscher-Ohlin Model in theory and practice / Edward E. Leamer.

p. cm. -- (Princeton studies in international finance, ISSN 0081-8070 ; no. 77)

Includes bibliographical references.

ISBN 0-88165-249-0 (pbk.) : $11.00

1. Heckscher-Ohlin principle. 2. Comparative advantage (International trade). I.

Title. II. Series.

HF1411.L423 1995

382--dc20

94-49591

CIP

Copyright ? 1995 by International Finance Section, Department of Economics, Princeton University.

All rights reserved. Except for brief quotations embodied in critical articles and reviews, no part of this publication may be reproduced in any form or by any means, including photocopy, without written permission from the publisher.

Printed in the United States of America by Princeton University Printing Services at Princeton, New Jersey

International Standard Serial Number: 0081-8070 International Standard Book Number: 0-88165-249-0 Library of Congress Catalog Card Number: 94-49591

CONTENTS

1 INTRODUCTION

1

2 THE LERNER-PEARCE DIAGRAM IN ACTION

5

The Factor-Price-Equalization Theorems

5

Applications of the Learner-Pearce Diagram

8

3 ALGEBRA OF THE (EVEN) HECKSCHER-OHLIN-VANEK MODEL

17

Neutral Technological Differences and Home Bias

19

4 LEAMER TRIANGLES

22

Effects on the United States of Physical-Capital

Accumulation in Japan

24

Effects on the United States of Capital Accumulation

in Germany

25

5 EVIDENCE

26

Patterns of Four Countries

26

Patterns over Time

33

Trade Patterns and Resource Supplies

36

6 THE HECKSCHER-OHLIN MODEL AND INCOME INEQUALITY

39

Three Mistaken Notions

41

REFERENCES

44

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