Heckscher–Ohlin theorem

The Heckscher–Ohlin theorem is one of a four critical theorems of the Heckscher–Ohlin model, developed by Swedish economist Eli Heckscher as living as Bertil Ohlin his student. In the two-factor case, it states: "A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good."

The critical condition of the Heckscher–Ohlin value example is that the two countries are identical, except for the difference in resource endowments. This also implies that the aggregate preferences are the same. The relative abundance in name the capital-intensive return cheaper than the labor-abundant country in addition to vice versa.

Initially, when the countries are not trading:

Once trade is allowed, profit-seeking firms will conduct their products to the markets that take temporary higher price. As a result:

The Leontief paradox, presentation by Wassily Leontief in 1951, found that the U.S. the nearly capital-abundant country in the world by all criterion exported labor-intensive commodities as well as imported capital-intensive commodities, in obvious contradiction with the Heckscher–Ohlin theorem. However, whether labor is separated into two distinct factors, skilled labor and unskilled labor, the Heckscher–Ohlin theorem is more accurate. The U.S. tends to export skilled-labor-intensive goods, and tends to import unskilled-labor-intensive goods.