The Development and Testing of Heckscher-Ohlin Trade Models
No names are more closely associated with modern trade theory than Eli Heckscher and Bertil Ohlin. The basic Heckscher-Ohlin proposition, according to which a country exports factors (embodied in goods) in relatively abundant supply and imports factors in relatively scarce supply, is a key component of modern trade theory. In this book, Robert Baldwin traces the development of the HO model, describing the historical twists and turns that have led to the basic modern theoretical model in use today. Baldwin not only presents a clear and cohesive view of the model's evolution but also reviews the results of empirical tests of its various versions.
Baldwin, who published his first theoretical article on the HO model in 1948, first surveys the development of the HO model and then assesses empirical tests of its basic proposition. Most discussions of empirical work on HO models confine themselves to the basic theorem, but Baldwin devotes a chapter to empirical tests of its three related propositions: the Stolper-Samuelson theorem, the Rybczynski theorem, and the factor price equalization theorem. He concludes that economists' understanding of the forces shaping international trade have been greatly improved through the interactive process of empirical testing and theoretical modification, but that many empirical economists (himself included) became so enamored with the elegant but highly unrealistic factor price equalization model developed from the insights of Heckscher and Ohlin that they neglected investigations of other versions of the basic HO model without this relationship.
Ohlin Lectures series
About the Author
Robert E. Baldwin is Hilldale Professor Emeritus in the Department of Economics at the University of Wisconsin-Madison. He is the author or coauthor of many books, including most recently The Decline of US Labor Unions and the Role of Trade. He is a Fellow of the American Academy of Arts and Sciences, a Research Associate at the National Bureau of Economic Research and a member of the Council on Foreign Relations.
"This book was worth the wait. Baldwin provides a careful and complete explanation both of the Heckscher-Ohlin model in its various forms, and of the empirical work that first failed, then later succeeded, in finding support for it. Baldwin's insights into both theory and empirics should inform all those who seek to contribute further to understanding international trade."
—Alan Deardorff, John W. Sweetland Professor of International Economics,University of Michigan
"Baldwin's analysis makes clear that Heckscher and Ohlin blazed trails that have aided the progress of later researchers and will keep doing so. By showing how a pathbreaking theory can spark subsequent modeling and empirics that synergistically teach us about key economic forces, this book takes the reader on a stimulating intellectual journey."
Scott C. Bradford, Department of Economics, Brigham Young University