Heckscher–Ohlin model

A theory of international trade that explains comparative advantage through differences in countries’ relative supplies of productive factors, such as labor and capital.

Factor abundance: A country’s relative supply of a productive input compared with another input. The model predicts exports of goods that use a country’s abundant factors intensively.
Comparative advantage: The ability to produce a good at lower opportunity cost than another producer. The model explains comparative advantage through differences in factor endowments.
Eli Heckscher: A Swedish economist whose 1919 article linked international trade to differences in factor endowments. His account supplied the core factor-proportions explanation of trade.
Leontief paradox: The finding that U.S. exports appeared more labor-intensive than imports despite the United States’ capital abundance. It is the classic empirical challenge to the model’s predictions.
Technology gap theory: A trade theory that attributes trade patterns to differences in technological knowledge between countries. It offers a technology-based explanation where factor endowments alone fit poorly.
Factor intensity: The relative amounts of different productive factors used to produce a good. Differences in factor intensity connect countries’ endowments to the goods they export.
Ricardian model: A trade model that attributes comparative advantage to differences in labor productivity. It explains trade using technology differences rather than relative factor supplies.
Bertil Ohlin: A Swedish economist who developed the factor-proportions theory of international trade. His 1933 book systematized the framework now bearing his name.
Human capital: The productive capacities embodied in people through education, training, and experience. Counting skilled labor as a distinct factor can change tests of factor-abundance predictions.
Linder hypothesis: The hypothesis that countries with similar per-capita incomes trade more in manufactured goods because their consumer demands resemble one another. It explains some trade between similarly endowed economies that the model does not emphasize.

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