Heckscher-Ohlin model

The Heckscher-Ohlin model (H-O model) is a General equilibrium mathematical model of the macroeconomy in international trade, developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics. It builds on David Ricardo's theory of comparative advantage by predicting the patterns of trade in the types of good that particular countries will specialize in exporting.

Econometric testing of H-O model theorems

Heckscher and Ohlin considered the Factor-Price Equalization theorem an econometric success because the large volume of international trade in the late 19th and early 20th centuries coincided with the convergence of commodity and factor prices worldwide.

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Modern econometric estimates have shown the model to perform poorly, however, and adjustments have been suggested, most importantly the assumption that technology is not the same everywhere. (This change would mean abandoning the pure H-O model.)

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