Trading factors: Heckscher-Ohlin revisited

Thursday 15 November 2012, 1.15PM to 2.15pm

Speaker(s): Professor Yves Balasko, University of York

Abstract

The Heckscher-Ohlin model without restrictions on factor trading is shown to be equivalent to an exchange model where the goods are the productive factors and consumer's preferences are derived from consumers' preferences for consumption goods. After having illustrated with Vanek's factor proportion theorem and Leontief's paradox the new perspective brought by this equivalence, this paper is devoted to extending the equilibrium manifold approach from the exchange model to the Heckscher-Ohlin model. This extension yields new properties that deal with the uniqueness of equilibrium, the number of equilibria and the continuity or lack of continuity of equilibrium selections in the Heckscher-Ohlin model. In the case of two consumers (countries), these properties are improved into a complete characterization of economies with a unique equilibrium. Several of these results highlight the important role played by the volume of net trade in factor contents in the Heckscher-Ohlin model.

Trading factors: Heckscher-Ohlin revisited (PDF , 292kb)

Location: Economics Staff Room (EC/202)

Admission: For Staff and Postgraduate students