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Rybczynski's Theorem in the Heckscher-Ohlin World -- Anything Goes

  • Opp, Marcus M.
  • Sonnenschein, Hugo F.
  • Tombazos, Christis G.

We demonstrate that Rybczynski's classic comparative statics can be reversed in a Heckscher-Ohlin world when preferences in each country favor the exported commodity. This taste bias has empirical support. An increase in the endowment of a factor of production can lead to an absolute curtailment in the production of the commodity using that factor intensively, and an absolute expansion of the commodity using relatively little of the same factor. This outcome - which we call "Reverse Rybczynski" - implies immiserizing factor growth. We present a simple analytical example that delivers this result with unique pre- and post-growth equilibria. In this example, production occurs within the cone of diversification, such that factor price equalization holds. We also provide general conditions that determine the sign of Rybczynski's comparative statics.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 79 (2009)
Issue (Month): 1 (September)
Pages: 137-142

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Handle: RePEc:eee:inecon:v:79:y:2009:i:1:p:137-142
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  8. Wenli Cheng & Jeffrey Sachs & Xiaokai Yang, 2004. "An extended Heckscher-Ohlin model with transaction costs and technological comparative advantage," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(3), pages 671-688, March.
  9. R. W. Jones, 1956. "Factor Proportions and the Heckscher-Ohlin Theorem," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 1-10.
  10. Sonnenschein, Hugo, 1973. "Do Walras' identity and continuity characterize the class of community excess demand functions?," Journal of Economic Theory, Elsevier, vol. 6(4), pages 345-354, August.
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