What Does the Heckscher-Ohlin Model Contribute to International Trade Theory? A Critical Assessment

Abstract

The Heckscher-Ohlin theory of comparative advantage was produced as an alternative to the Ricardian model and had an ideological mission: the elimination of the labor theory of value and the incorporation of the neoclassical price mechanism into international trade theory. This article first questions the empirical validity of the Heckscher-Ohlin model and argues that most of the empirical work aimed at proving the validity of the model by focusing on its power to predict trade patterns is irrelevant. Moreover, the dynamic version of the model, which predicts dynamic structural change in the long run, is based on simple empiricism. Second, it exposes the theoretical weaknesses of the model by questioning its treatment of capital and labor. Finally, it challenges the view that the model surpasses the Ricardian model in its ability to predict patterns of trade between low- and high-income countries by demonstrating that the Ricardian model would also anticipate similar trade patterns.

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