The Heckscher Ohlin Model Flashcards
Vilka är antagandena i HO-modellen?
+ Två varor, två produktionsfaktorer (land & labor)
+ Constant returns to scale
+ Perfect competition in all markets
+ Productionfactors are mobile across industries
When is a good labor intensive?
When at any given W/R, the labor-land ratio is greater in the production of the good than the production of the other good.
What is the leontief paradox?
+ USA kom ut från WWII rikare än andra länder. Arbetare i landet arbetade med mer kapital.
+ Relativt sett capital-abundant och borde förvänta sig att de producerade capital intensive goods.
+ Leonteif presenterade att USAs export var mindre capital intensive än importerna. Största beviset mot HO
+ Är idag överens om att modellen inte beskriver verkligheten bra.
For each relative price of cloth, is the relative quantity of cloth supplied higher for Home or for Foreign?
Which country has the higher relative price of cloth?
+ For each relative price of cloth (Pc/Pf), the relative supplied (Qc/Qf) is higher for home
Since home is labor-abundant and cloth is labor-intensive (using the Rybczynski theorem)
+ Foreign has the higher relative price of cloth
What is factor price equalization?
+ It is a part of the HO-model and has the assumptions that both countries produces both goods and same technology
+ The relative price of goods will equalize between the two autarky prices. Since relative factor prices can be derived from relative prices of goods they are equalized too.
+ In reality prices of factors are not equal because the crucial assumptions don’t hold.
What is factor price equalization?
+ It is a part of the HO-model and has the assumptions that both countries produces both goods and same technology
+ The relative price of goods will equalize between the two autarky prices. Since relative factor prices can be derived from relative prices of goods they are equalized too.
+ In reality prices of factors are not equal because the crucial assumptions don’t hold.
Visa att lönen och hyran inte kan vara en viss mängd
+ Beräkna kostnaden för produktionen
+ Inte ok att göra vinst/förlust i en competitive economy
What is the stolper-samuelsson theorem?
+ This conclusion is a part of the HO-model
+ If both goods are produced an increase in the relative price of the labor intensive good (cloth) will increase the wage rate relative to both good prices and reduce the rental rate relative to both goods.
+ Om båda fortsätter produceras kommer en ökning av relativa priset av en vara gynna faktorn som utnyttjas intensivt och skada den andra faktorn.
+ Viktigt eftersom handel förändrar relativa priset av varor och visar att det finns vinnare och förlorare på handel.
What does the rybezynski theorem say?
For any given relative price of goods and given that both goods are produced. When the supply of a factor increases the output of the good which use the factor intensly will increase and the other will decrease.
What does the heckscher-ohlin model say?
A country will specialize and export the good which intensively uses the factor which the country is abundant in.
Hur påverkar en ökning av priset på cloth wage-rental-ratio?
+ There is a one to one relationship between factor price ratio and relative price since cloth is labor intensive and food is land intensive.
+ If the price of cloth increases so will the relative price, which in turn will increase the wage-rental ratio.
+ The production of a good is more sensitive to the price change of the factor of which it uses intensively.
Show that workers benefit from increase in price of cloth
+ An increase in price of cloth will increase the relative price of cloth, which will increase the wage-rental ratio.
+ The change in relative factor prices will increase the land/labor ratio for both goods.
+ The implications are that there are more land per worker in both industries, which will increase marginal product and therefor real wages.
+ Another implication is that there will be less workers per unit of land decreasing the marginal product of land.
Land owners are worse off and workers are better off.
