Classical models of trade - The heckscher-ohlin model: factor endowments

5 important questions on Classical models of trade - The heckscher-ohlin model: factor endowments

What is the difference between Ricardian model and HO model?

Ricardian: difference in technology per country are causing the absolute/competitive advantages
Ho-model: same technologies but the countries differ in factor endowments (land and labour), trade will come from these difference

When is home land abundant?
And when is home labor abundant?
What is factor intensity?

We say home is land abundant if T/L > T*/L*
We say home is labour abundant if L/T> L*/T*

Food is land intensive if aTf/aLf  >  aTc/aLc
Clothes is labor intensive aLc/aTc > aLf/aTf



Why are the opportunity cost not constant in the HO model?

In one point the one constraint is binding in another point the other
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How to determine opportunity costs HO model?

- land constraint : -  atc/atf  (altijd de c boven)
- when produce more of the good that is land/labour abundant the
   opportunity costs are going to decrease

What is the Rybcznski theorem?

If there is an increase in a resource, the quantity of the good that uses that resource intensively will increase, quantity of the other good will decrease.
- Additional labor is better put tu use producing clothes, but to produce more clothes requires taking some land from food production.

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