The Hechsler - Ohlin Theory
Eli Heckscher (1879-1952) was a Swedish economist. He is best known for his book “Mercantilist”. Although his major interest was in studying economic history, he also developed the essentials of the factor endowment (factor proportions) theory of international trade in 1919.
Bertil Ohlin (1899-1979) was Heckscher`s student who developed and elaborated the factor endowment theory. He was also a major political figure in Sweden and served in Riksdag. He was Minister of Trade during World War II. In 1979 Ohlin was awarded a Nobel prize jointly with James Meade for his work in international trade theory.
The Heckscher-Ohlin model incorporates a number of realistic characteristics of production that are left out of the Ricardian model. In the Ricardian model only one factor of production, labor, is needed to produce goods and services. The productivity of labor is assumed to vary across countries which implies a difference in technology between nations. It was the difference in technology that motivated advantageous international trade in the model.…