Heckscher-Ohlin Theories from Factor Price Equalization to Factor Price Localization vs Empirical Observations from the Leontief Paradox to the Leontief Trade

Guo, Baoping (2015): Heckscher-Ohlin Theories from Factor Price Equalization to Factor Price Localization vs Empirical Observations from the Leontief Paradox to the Leontief Trade.

Abstract

This paper attains the general trade equilibrium of factor price localizations of the Trefler Hicks-Neutral HOV model. The breakthrough is to use Helpman and Krugman’s equilibrium analyses of trade volume (see Helpman and Krugman, 1985, Chapter 1). The trade consequences with factor price localization show some new results. The factor price localizations are associated with the three trade patterns. The Leontief paradox phenomenon is a regular trade pattern conceptually (this study calls it the Leontief trade). The Leontief trade not only occurs by factor intensity reversals (FIR) but also occurs without factor intensity reversals. The sign predictions based on the effective endowments (see Trefler 1995) and the virtual endowments (see Fisher and Marshall, 2008) favor both the Heckscher-Ohlin trade and the Leontief trade. The empirical studies based on them have included the Leontief trade. The study explains well the skill intensity reversals (assignment intensity reversal (see Kurokawa, 2011 and Sampson, 2016) by localized factor prices. Like the Leontief trade, the Heckscher-Ohlin trade may cause factor reward intensity reversal when countries have different productivities.

• Item Type: MPRA Paper
• Language: English
• Keywords: Localized factor prices, factor price equalization, factor price non-equalization, General equilibrium of trade, Leontief Paradox, Leontief trade
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics; F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F10 - General; F - International Economics > F1 - Trade > F15 - Economic Integration

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