Heckscher–Ohlin theory

Daniel Trefler

Chapter 20 in Elgar Encyclopedia of International Trade, 2026, pp 95-100 from Edward Elgar Publishing

Abstract: This entry reviews the Heckscher–Ohlin (HO) theory of international trade, which explains how countries’ factor endowments shape their comparative advantage. It presents the core HO theorems – on trade patterns, output mix (Rybczynski), factor prices, and distributional effects (Stolper–Samuelson) – and explores the model's implications for trade, inequality, and development. The empirical performance of the HO model is assessed, including the Leontief Paradox and the shift from predicting trade in goods to predicting the factor content of trade (Heckscher–Ohlin–Vanek). While the HO model has struggled empirically, extensions incorporating international productivity differences and skill-biased technical change have improved its fit. The essay emphasizes the limited role of output shifts and the more prominent roles of factor prices and skill-biased technology in absorbing endowment differences. Despite its empirical shortcomings, the HO framework remains influential in trade policy, especially in understanding the unequal gains from trade between skilled and unskilled workers.

Keywords: Comparative advantage; Trade patterns; Inequality; Endowments; Technology; Skills; Heckscher-Ohlin; Stolper-Samuelson; Rybczynski; Leamer (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
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