Heckscher-Ohlin in Theory and Reality

Date: Nov, 2007
ODID Working Paper No. 157
Author(s): Adrian Wood (QEH)

Most economists think that H-O works well in theory, but badly in reality, whereas the opposite is closer to the truth. After a long decline, H-O has recently experienced an empirical revival, but the standard Samuelsonian formalisation of the theory is still unsatisfactory. A modified formalisation of the theory, which gives trade costs more of a role, fits the evidence better. Appropriately interpreted, H-O is a useful part of the theory of economic development, as well as of international trade.

ODID Author(s)