Friday 11 March 2016

TOTD: International Trade: Heckscher–Ohlin Model

Basic situation: Two identical countries (A and B) have different initial factor endowments. Autarky equilibrium (A^A, A^B): no trade, individual production equals consumption. Trade equilibrium: both countries consume the same (C^A = C^B), especially beyond their own Production–possibility frontier; production and consumption points are divergent.
Source: https://en.wikipedia.org/wiki/Heckscher%E2%80%93Ohlin_model