KELO M PO K 2

AI SYAH M U H RAH M AW ATI 1 1 1 5 0 8 6 0 0 0 0 0 0 6

TI ASAGU ST I AW AT I 1 1 1 5 0 8 6 0 0 0 0 0 1 5

RESO U RCES
AN D T RAD E
M O D EL H ECKSH ER- O H LI N ( H - O )
That international trade is largely
driven by differences in countries’
resources
is one of the most influential theories in
international economics. Developed by
two Swedish economists, Eli Heckscher
and Bertil Ohlin (Ohlin received the
Nobel Prize in economics in 1977)
Because the theory emphasizes the
interplay between the proportions in
which different factors of production are
available in different countries and the
proportions in which they are used in
producing different goods, it is also
referred to as the factor-proportions
theory.
 A . M O D EL O F A TW O -
FACTOR ECONOMY
In this chapter, we’ll focus on
the simplest version of the
factor-proportions model,
sometimes referred to as
“2 by 2 by 2”: two countries,
two goods, two factors of
production.
1. PRI C ES A N D P R O D U C T I O N
 2 . CH O O SI N G T H E M I X O F I N PU T

As we have noted, in a two-factor model producers may have room

for choice in the use of inputs. A farmer, for example, can choose between
using relatively more mechanized equipment (capital) and fewer workers, or
vice versa. Thus, the farmer can choose how much labor and capital to use
per unit of output produced.
What input choice will producers actually make? It depends on the relative
costs of capital and labor. If capital rental rates are high and wages low,
farmers will choose to produce using relatively little capital and a lot of
labor; on the other hand, if the rental rates are low and wages high, they will
save on labor and use a lot more capital.
3. F A C T O R PRI C ES A N D GOODS
PRI C ES
The cost of producing a
good depends on factor
prices: If wages rise, then
other things equal to the
price of any good whose
production uses labor will
also rise.
03
4 . RESO U RCES A N D O U T PU T
 B . E F F E C T S O F IN T E R N A T IO N A L T R A D E
B E T W E E N T W O - F A C T O R E C O N O M IE S

1. RELATI VE PRI C ES A N D THE

PAT T E R N OF T R A D E
2. T R A D E A N D T H E
D I S T R I B U T I O N OF I N C O M E

The general conclusion

about the i ncome distribution effects of international trade in the
long run is: Owners of a
country ’ s abundant factors gain from trade , but owners of a
country ’ s scarce factors lose .
03
FACTOR-PRICE EQUALIZATION
 C. EM PI RI CA L EV I D EN CE O N TH E
H ECKSCH ER- O H LI N M O D EL

1 . T RAD E I N GO O D S A S A SU BST I T U T E FO R
T RA D E I N FA CT O RS
P A T T E R N S OF EXPORTS B E T W E E N
DEVELOPED
A N D DEVELOPING COUNTRIES

02
I M PLI C AT I O N S
OF THE TESTS

03
 S U M M A R Y

I N T H E I D E A L M O D E L , I N T E R N AT I O N A L
T R A D E W I L L REALLY L E A D T O P R I C E
E Q U A L I Z AT I O N OF FA C TO R S S U C H AS
L A B O R A N D C A P I TA L A M O N G
C O U N T R I E S . I N FA C T, C O M P L E T E
FA C T O R P R I C E E Q U I T Y IS N O T
ADDRESSED D U E T O RESOUR C E
DIFFEREN C ES, B R O A D BARRIERS T O
TRADE, A N D I N T E R N AT I O N A L
T E C H N O L O G I C A L DIFFEREN C ES.