Exam 5: Resources and Trade: The Heckscher-Ohlin Model

Why is it that North-South trade in manufactures seems to be consistent with the results or expectations generated by the factor-proportions theory of international trade,whereas North-North trade is not?

Suppose that there are two factors,capital and land,and that the United States is relatively land endowed while the European Union is relatively capital-endowed.According to the Heckscher-Ohlin model

If a good is capital intensive it means that the good is produced

Why do you suppose that South-South trade does not conform in volume,but does conform in pattern with expectations generated by the Heckscher-Ohlin model?

If two countries are very different in relative factor abundance,then empirical support for which of the following would less likely?

Trade benefits a country by

Suppose Australia, a land (K)-abundant country, and Sri-Lanka, a labor(L)-abundant country, both produce labor and land intensive goods with the same technology. -Use the diagram above to identify the pre-trade situation for Australia and Sri-Lanka.Where on the K/L axis will you find each of the two countries? Which of the two countries has a higher relative wage,w/r? Which product is the labor intensive,and which is the land intensive one? Show where the relative price of cloth to food will be found once trade opens between these two countries.Show where the relative wages of each will appear.

The Leontief Paradox

Assume that only two countries, A and B, exist. -Refer to the table above.You are told that Country B has no minimum wage or child labor laws.Now the correct answer is

Which of the following is an assertion of the Heckscher-Ohlin model?

In the Heckscher-Ohlin model,countries are assumed to differ only in terms of their

One of the commonly used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic,or that if the per capita incomes were the same in two countries,the proportions of their expenditures allocated to each product would be the same as it is in the other country.Imagine that this assumption is false,and that in fact,the tastes in each country are strongly biased in favor of the product in which it has a comparative advantage.How would this affect the relationship between relative factor abundance between the two countries,and the nature (factor-intensity)of the product each exports? What if the taste bias favored the imported good?

International trade leads to complete equalization of factor prices.Discuss.

In the 2-factor,2 good Heckscher-Ohlin model,the production possibility frontier is kinked when

The Heckscher-Ohlin model is famous for being elegant and mathematically sophisticated,yet failing to describe reality.One manifestation of this fact is Trefler's Case of Missing Trade.Explain what exactly is missing.In what sense is it missing? How would you explain why it is missing? How can a relaxation of the identical production functions explain the case of the missing trade? How did the results obtained by Davis and Weinstein strengthen support for the validity of the HO model?

Which of the following empirical studies cast the most doubt on the Heckscher-Ohlin model?

If Gambinia has many workers but very little land and even less productive capital,then,following the Heckscher-Ohlin model,we predict that Gambinia will export

If Japan is relatively capital rich and the United States is relatively land rich,and if food is relatively land intensive then trade between these two,formerly autarkic countries will result in

Assume that only two countries, A and B, exist. -Refer to the table above.If good S is capital intensive,then following the Heckscher-Ohlin Theory

Factor-intensity reversals describe a situation in which the production of a product may be land-intensive in one country,and relatively labor intensive in another (at given relative wage levels).For example,cotton may be land intensive in the U.S.,and labor intensive in Egypt where land is relatively scarce and expensive.Suppose factor-intensity reversals were common.How would that affect the conclusion that a country in which land is relatively scarce will not be the country with a comparative advantage in the land-intensive product?