Factor Intensity

Farrokh Langdana and Peter T. Murphy
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Farrokh Langdana: Rutgers Business School

Chapter Chapter 4 in International Trade and Global Macropolicy, 2014, pp 47-56 from Springer

Abstract: Abstract In this chapter we delve deeper into Ricardian theory. Heckscher and Ohlin integrated the notion of factor abundance with the fact that different goods and services employ different levels of factor intensities. Simply stated, the Heckscher -Ohlin theorem (HOT) demonstrates that a country has a comparative advantage in the good that employs its abundant factor intensely. The Stolper-Samuelson theorem (SST) shows us how each trading country's abundant factor will benefit from trade. We see how Ricardo, HOT and SST working in tandem can increase the overall welfare of both trading partners. Finally, we see the Mundell Hypothesis in-action, where movement of products and services can take the place of the migration of workers.

Keywords: Free Trade; Comparative Advantage; North American Free Trade Agreement; Trade Theory; Trading Country (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-1-4614-1635-7_4

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DOI: 10.1007/978-1-4614-1635-7_4

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