What is Heckscher-Ohlin Stolper-Samuelson theorem?

From Wikipedia, the free encyclopedia. The Stolper–Samuelson theorem is a basic theorem in Heckscher–Ohlin trade theory. It describes the relationship between relative prices of output and relative factor rewards—specifically, real wages and real returns to capital.

What does the Heckscher Ohlin theory postulate?

The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can most efficiently and plentifully produce. The model emphasizes the export of goods requiring factors of production that a country has in abundance.

What does the Stolper-Samuelson theorem say?

The simple Stolper-Samuelson theorem in the 2 x 2 model concludes that the relative wages and also the real wages of skilled workers throughout the economy should rise when the prices of skilled worker-intensive industries increase, and the real wages of the opposite factor, unskilled workers, should drop.

What are the assumptions of the Stolper-Samuelson theorem?

The neoclassical H-O trade model used by Stolper and Samuelson (1941) assumes that goods of a particular industry are perfect substitutes, regardless of the country of origin, and that costs of production depend on wages of factors, whose supply in each country is fixed.

What does the Stolper-Samuelson theorem predict about the distribution implications of free trade?

The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country’s abundant factor. It shows that countries which are labor abundant in a global sense may see wages decline with liberalization if they are capital abundant in a local sense.

What makes the Stolper-Samuelson theorem different than the Ricardo Viner model?

The Stolper-Samuelson Theorem holds that an industry with relative factor abundance will advocate for free trade, while one with relative scarcity will advocate for managed trade. The Ricardo-Viner theorem, however, assumes that factors are specific to their industries, and that capital might not be mobile.

How is Rybczynski connected to Stolper-Samuelson theorem?

Although the Stolper-Samuelson and Rybczynski theorems can be viewed as the duals of one another, one notes a fundamental asymmetry between them: while an increase in an output price (the experiment under- lying Theorem 1A) results in a change in the output mix (the supply of the corresponding good increases, and the …

When trade is based on factors Stolper-Samuelson predicts that country abundant factors will benefit from trade?

The Stolper-Samuelson theorem predict trade liberalization will shift income toward a country’s abundant factor. For developing countries, this suggests liberalization will principally benefit the abundant unskilled labor. Yet extensive empirical studies have identified many cases with a contrary result.

How does the specific factors model differ from the Heckscher-Ohlin HO model?

In a Heckscher-Ohlin model, both factors, capital and labor, are assumed to be mobile. Hence, the HO model is a long-run model , whereas the specific factors model is a short run model in which capital and land inputs are fixed but labor is a variable input in production.

Is the Ricardian model short run?

Under these circumstances, the Ricardian–Viner model exhibits a Heckscher–Ohlin equilibrium in the long run similar to that of the Stolper–Samuelson theorem. In this sense, the model can be seen as a short-run version of the Heckscher–Ohlin model of comparative advantage.

What is the Rybczynski effect?

The Rybczynski theorem displays how changes in an endowment affects the outputs of the goods when full employment is sustained. The theorem is useful in analyzing the effects of capital investment, immigration and emigration within the context of a Heckscher-Ohlin model.

What is Factor Price Equalization Theorem?

Simply stated the theorem says that when the prices of the output goods are equalized between countries as they move to free trade, then the prices of the input factors (capital and labor) will also be equalized between countries.

What is the Heckscher-Ohlin theorem?

This is the Heckscher-Ohlin theorem: a country exports goods that are produced relatively intensively by the country ’ s relatively abundant factor of production, and imports goods that are produced relatively intensively by the country ’ s relatively scarce factor of production.

What is the Heckscher Ohlin Samuelson model?

Heckscher-Ohlin-Samuelson Model. This is the Heckscher-Ohlin theorem: a country exports goods that are produced relatively intensively by the country ’ s relatively abundant factor of production, and imports goods that are produced relatively intensively by the country ’ s relatively scarce factor of production.

What is Stolper-Samuelson theorem in economics?

Stolper -Samuelson theorem : If the relative price of a good increases, then the relative price of the factor used intensively in the production of that good increases, while the relative price of the other factor decreases. So, any change in the relative price of goods alters the distribution of income.

How does the Samuelson theorem affect the distribution of income?

-Samuelson theorem : If the relative price of a good increases, then the relative price of the factor used intensively in the production of that good increases, while the relative price of the other factor decreases. So, any change in the relative price of goods alters the distribution of income.