What Is the Heckscher-Ohlin Model?The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can most efficiently and plentifully produce. Also referred to as the H-O model or 2x2x2 model, it's used to evaluate trade and, more specifically, the equilibrium of trade between two countries that have varying specialties and natural resources. Show
The model emphasizes the export of goods requiring factors of production that a country has in abundance. It also emphasizes the import of goods that a nation cannot produce as efficiently. It takes the position that countries should ideally export materials and resources of which they have an excess, while proportionately importing those resources they need. WarningHere is some important information regarding the Heckscher-Ohlin model.
The Basics of the Heckscher-Ohlin ModelThe primary work behind the Heckscher-Ohlin model was a 1919 Swedish paper written by Eli Heckscher at the Stockholm School of Economics. His student, Bertil Ohlin, added to it in 1933. Economist Paul Samuelson expanded the original model through articles written in 1949 and 1953. Some refer to it as the Heckscher-Ohlin-Samuelson model for this reason. The Heckscher-Ohlin model explains mathematically how a country should operate and trade when resources are imbalanced throughout the world. It pinpoints a preferred balance between two countries, each with its resources. The model isn't limited to tradable commodities. It also incorporates other production factors such as labor. The costs of labor vary from one nation to another, so countries with cheap labor forces should focus primarily on producing labor-intensive goods, according to the model. Evidence Supporting the Heckscher-Ohlin ModelAlthough the Heckscher-Ohlin model appears reasonable, most economists have had difficulty finding evidence to support it. A variety of other models have been used to explain why industrialized and developed countries traditionally lean toward trading with one another and rely less heavily on trade with developing markets. The Linder hypothesis outlines and explains this theory. It states that countries with similar incomes require similarly valued products and that this leads them to trade with each other. Real-World Example of the Heckscher-Ohlin ModelCertain countries have extensive oil reserves but have very little iron ore. Meanwhile, other countries can easily access and store precious metals, but they have little in the way of agriculture. For example, the Netherlands exported almost $577 million in U.S. dollars in 2019, compared to imports that year of approximately $515 million. Its top import-export partner was Germany. Importing on a close to equal basis allowed it to more efficiently and economically manufacture and provide its exports. The model emphasizes the benefits of international trade and the global benefits to everyone when each country puts the most effort into exporting resources that are domestically naturally abundant. All countries benefit when they import the resources they naturally lack. Because a nation does not have to rely solely on internal markets, it can take advantage of elastic demand. The cost of labor increases and marginal productivity declines as more countries and emerging markets develop. Trading internationally allows countries to adjust to capital-intensive goods production, which would not be possible if each country only sold goods internally. journal article Economic Interdependence and War: A Theory of Trade ExpectationsInternational Security Vol. 20, No. 4 (Spring, 1996) , pp. 5-41 (37 pages) Published By: The MIT Press https://doi.org/10.2307/2539041 https://www.jstor.org/stable/2539041 Read and download Log in through your school or library Alternate access options For independent researchers Read Online Read 100 articles/month free Subscribe to JPASS Unlimited reading + 10 downloads Purchase article $19.00 - Download now and later Read Online (Free) relies on page scans, which are not currently available to screen readers. To access this article, please contact JSTOR User Support. We'll provide a PDF copy for your screen reader.With a personal account, you can read up to 100 articles each month for free. Get StartedAlready have an account? Log in Monthly Plan
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Journal Information International Security publishes lucid, well-documented essays on all aspects of the control and use of force, from all political viewpoints. Its articles cover contemporary policy issues, and probe historical and theoretical questions behind them. Essays in International Security have defined the debate on American national security policy and have set the agenda for scholarship on international security affairs. Readers of International Security discover new developments in: the causes and prevention of war ethnic conflict and peacekeeping post-Cold War security problems European, Asian, and regional security nuclear forces and strategy arms control and weapons proliferation post-Soviet security issues diplomatic and military history Publisher Information Among the largest university presses in the world, The MIT Press publishes over 200 new books each year along with 30 journals in the arts and humanities, economics, international affairs, history, political science, science and technology along with other disciplines. We were among the first university presses to offer titles electronically and we continue to adopt technologies that allow us to better support the scholarly mission and disseminate our content widely. The Press's enthusiasm for innovation is reflected in our continuing exploration of this frontier. Since the late 1960s, we have experimented with generation after generation of electronic publishing tools. Through our commitment to new products—whether digital journals or entirely new forms of communication—we have continued to look for the most efficient and effective means to serve our readership. Our readers have come to expect excellence from our products, and they can count on us to maintain a commitment to producing rigorous and innovative information products in whatever forms the future of publishing may bring. Rights & Usage This item is part of a JSTOR Collection. Which of the following theories argues that the observed pattern of trade between nations may in part be due to the ability of firms to capture first mover advantages?Thus, the observed pattern of trade between nations may be due in part to the ability of firms within a given nation to capture first-mover advantages. In a work related to the new trade theory, Michael Porter developed a theory referred to as the theory of national competitive advantage.
Whose theory was the first to explain why unrestricted free trade is beneficial to a country?David Ricardo's theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country.
Which theory suggests that nations may benefit from trade irrespective of resource endowments or technology?Nations may benefit from trade irrespective of resource endowments or technology. New trade theory suggests nations which has the advantage of producing the product first predominate in the export of product.
What principle or theory argues that it is in a country's best interest to maintain trade surplus?Mercantilism is an economic theory that advocates government regulation of international trade to generate wealth and strengthen national power. Merchants and the government work together to reduce the trade deficit and create a trade surplus.
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Which of the following theories began to emerge when economists pointed out that the ability?
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