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Factor Intensity

In: International Trade and Global Macropolicy

Author

Listed:
  • Farrokh Langdana

    (Rutgers Business School)

  • Peter T. Murphy

Abstract

In this chapter we delve deeper into Ricardian theory. Heckscher and Ohlin integrated the notion of factor abundance with the fact that different goods and services employ different levels of factor intensities. Simply stated, the Heckscher -Ohlin theorem (HOT) demonstrates that a country has a comparative advantage in the good that employs its abundant factor intensely. The Stolper-Samuelson theorem (SST) shows us how each trading country's abundant factor will benefit from trade. We see how Ricardo, HOT and SST working in tandem can increase the overall welfare of both trading partners. Finally, we see the Mundell Hypothesis in-action, where movement of products and services can take the place of the migration of workers.

Suggested Citation

  • Farrokh Langdana & Peter T. Murphy, 2014. "Factor Intensity," Springer Texts in Business and Economics, in: International Trade and Global Macropolicy, edition 127, chapter 0, pages 47-56, Springer.
    • Handle: RePEc:spr:sptchp:978-1-4614-1635-7_4
    DOI: 10.1007/978-1-4614-1635-7_4
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