Heterogeneous Capital and the Heckscher-Ohlin-Samuelson Theory of Trade

J. S. Metcalfe and Ian Steedman

Chapter 5 in Fundamental Issues in Trade Theory, 1979, pp 64-76 from Palgrave Macmillan

Abstract: Abstract While many objections have been raised as to the validity of the assumptions underlying the Heckscher-Ohlin-Samuelson theory of trade, that theory is widely regarded as immune from criticism of its internal logic, once the assumptions are granted. If the theory is to be useful in the understanding of real world trade, however, the assumption that each country has a given endowment of capital must be interpreted in such a way that the heterogeneity of capital goods can be allowed for. Such an interpretation is indeed possible but it immediately raises doubts as to whether recent results from the controversy over capital theory might not show the internal logic of the HOS analysis to be open to criticism. The object of the essay is to suggest that the existence of heterogeneous capital goods does lead to a breakdown of the logic of the HOS theory and hence to that of its major conclusions.

Keywords: Interest Rate; Real Wage; Capital Good; Factor Endowment; Trade Theory (search for similar items in EconPapers)
Date: 1979
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-04378-1_5

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DOI: 10.1007/978-1-349-04378-1_5

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