Note sparse e grafici sul modello di Heckscher e Ohlin

Luca De Benedictis

Factor endowments

Physical definition

ForeignHome

LK

LK

Factor price definition

ForeignHome

rw

rw

Home is relatively capital-abundant (= labor-scarce)

Foreign is relatively labor-abundant (= capital-scarce)

Factor intensities

XY LK

LK

Good Y relatively capital-intensive

Good X is relatively labor-intensive

Endowments and production possibilities

X

Y

FAp

L

K

HE

FE

HH L

Kk

Fk

HX

HX

HY

HY

FX

FX

FY

FY

HAp

Note: Here Y is more capital-intensive at all factor price ratios.

In autarky, the relative price of the labor-intensive good (X) is lower in the labor-abundant country (Foreign).

International equilibrium in the Heckscher-Ohlin model

X

Y

HX

HY

FX

FY

)( PC XX 0

p

HomeEx

ForeignEx

HAp

FAp

*p

*p

=C=D

HA FA

C D

Trade in the Heckscher-Ohlin model

• The Heckscher-Ohlin theorem: A country will export the commodity that intensively uses its relatively abundant factor.

• The relatively labor-abundant country exports labor services embodied in goods and imports capital services embodied in goods

Trade and factor prices in theHeckscher-Ohlin model

Indirect exports of a factor

supply of the factor in the domestic market

domestic price of the factor

Indirect imports of a factor

supply of the factor in the domestic market

domestic price of the factor

Trade tends to make factor prices more similar between trading countries

Product prices and factor prices in the H-O model

Y

X XO

YO

XL

YL

XK

YK

B

A

A'B

A

ApB

Bp

A

Unit value isoquants and isocosts in the H-O model

1$X

L

K

1$Y

1$ rKwL

Yk

Xk

r1$

w1$

YYY

XXX

rKwLYp

rKwLXp

1$

1$Hk

Some stylized facts about economic trends since 1975

• Physical and political barriers to trade have been significantly reduced in many countries

• Real wages (for unskilled labor) have remained constant or even fallen in the North - increased income inequalities there.

• Real wages have increased for large groups of workers in the South (but not for all and large variations between countries).

Factor price equalization

L

K

Yk

Xk

HaFa*

HaY 1$ FaY 1$

HaX 1$

FaX 1$

Limits to factor price equalization

L

K

Yk

Xk

FH

'Fk

Hk

How will a change in product prices affect factor prices?

Y

X XO

YO

XL

YL

XK

YK

A

B

A

B

A'

B

Ap

Bp

Xk YkandA

p

Another look at how a change in product prices affects factor

prices

L

K

AB

AY 1$

YAk

XAk

BY 1$

AX 1$

BX 1$

XBk

YBk

How will a change in product prices affect real wages?

K

LKf ,

LKf ,

A

B

slope = MPK

LMPpw

LXX

MPp

w

LYY

MPp

w

KMPpr

KXX

MPp

r

KYY

MPp

r

The Stolper-Samuelson theoremIf there are constant returns to scale and both goods continue to be produced, a relative increase in the price of a good will increase the real return to the factor used intensively in that industry and reduce the real return to the other factor.

In our example:• there was a relative increase in the price of good X• labor is used intensively in that sector• in both sectors, the capital-intensity of production was raised after the price change

LXX

MPp

w

LYY

MPp

w

KXX

MPp

r

KYY

MPp

r

and

The effect of changes in factor endowments on outputAssume constant relative prices of goods

YL

XK

XO XL

YK

YO

Q

Xk

Yk

'YO

'YK

Yk

'Q

The Rybczynski theoremIf relative commodity prices are constant and if both commodities continue to be produced, an increase in the supply of a factor will lead to an increase in the output of the commodity using that factor intensively and a decrease in the output of the other commodity.

In our example:• there was an increase in the supply of labor• labor is used intensively in the production of good X

X and Y