Author : Edward E. Leamer
Publisher : International Finance Section Department of Econ Ton Univers
Page : 74 pages
File Size : 37,39 MB
Release : 1995
Category : Business & Economics
ISBN :
Book Description
This study discusses the Hecksher-Ohlin factor-proportions theory of comparative advantage, which states that international commerce compensates for the uneven geographic distribution of productive resources, that traded commodities are really bundles of factors (land, labor, and capital), and that the exchange of commodities internationally is therefore indirect arbitrage, transferring the services of otherwise immobile factors of production from locations where these factors are abundant to locations where they are scarce. Under some circumstances, this indirect arbitrage can completely eliminate price differences. Despite new models in trade theory and evidence from trade theorists suggesting that the H-O model is faulty, the theory is still extraordinarily useful: pedagogically, in correcting the assumptions of the partial-equilibrium with regard to labor supply and wage rates; politically, in showing that although tariffs and quotas have redistributive effects, they reduce efficiency; and empirically, in explaining important aspects of the patterns of international trade. The H-O model is essential for any study of the impact of globalization on the American workforce.