 A simulation of the Heckscher–Ohlin theoremToshitaka Fukiharu Mathematics and Computers in Simulation (MATCOM), 2004, vol. 64, issue 1, 161-168 Abstract: The Heckscher–Ohlin (H–O) theorem is one of the classical results in international trade theory. In the real world, however, this tendency has not been observed. Two restrictive assumptions are required for this theorem to hold. One is the identity of utility functions between the two trading countries, and the other relates to production functions. In this paper, simulations are conducted to identity which assumption is more important in order for the H–O theorem to hold. Production functions (constant returns to scale) and utility functions are assumed to be of Cobb–Douglas type. In the first simulation, 10,000 pairs of parameters on production and utility functions are selected randomly, where production function on both countries are identical and utility functions can be different. The H–O property is observed for approximately 70% of the solutions. In the second simulation, the same simulation is conducted where utility functions in both countries are identical and production functions can be different. Then, H–O property is observed for approximately 50% of the solutions. Keywords: International trade; Heckscher–Ohlin; Leontief paradox; Simulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:64:y:2004:i:1:p:161-168 DOI: 10.1016/S0378-4754(03)00129-0 Access Statistics for this article Mathematics and Computers in Simulation (MATCOM) is currently edited by Robert Beauwens More articles in Mathematics and Computers in Simulation (MATCOM) from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.