<p>The HO model has been generalised. Vanek does a good job of it. </p>

<p>Instead of only two countries, there is an index of countries.</p>

<ul>
<li><p>There are many industries.</p></li>
<li><p>Identical technology</p></li>
<li><p>Identical, homothetic tastes.</p></li>
</ul>

<p>The HOV theorem states that if a country is abundant in a factor,
its factor content of trade in that factor should be positive, and
negative otherwise.</p>

<p>Empirically, this model is not that successful. <a href="http://www.nber.org/papers/w5625.pdf">Here</a> is a good paper discussing the applications and results.</p>

<p>See below for that extension:
Vanek, Jaroslav, The Factor Proportions Theory: The N-Factor Case,” Kyklos, October 1968, 21, 749-755.</p>

CC BY-SA 3.0
2015-01-20T05:56:16.260Z
2015-01-20T05:56:16.260Z
Jamzy
<p>The <a href="http://en.wikewipedia.org/wiki/Heckscher%E2%80%93Ohlin_model">Heckscher-Ohlin Model</a> is normally presented for the case of 2 countries, 2 factors of production and 2 traded goods, leading to statements that, subject to free trade and various other assumptions:</p>

<ol>
<li><p>A country with a relative abundance of a factor will specialize in
and export the good whose production makes relatively intensive use
of that factor (the Heckscher-Ohlin Theorem).</p></li>
<li><p>The return to a factor will be equalized between the countries (the
Factor Price Equalization or Heckscher-Ohlin-Samuelson Theorem).</p></li>
</ol>

<p>Do these results generalize, subject to the same assumptions, to cases with more than 2 countries, factors or traded goods, and what are good sources that treat this topic?  Of particular interest are cases with 3 factors: labour, man-made capital and <a href="http://en.wikipedia.org/wiki/Natural_capital">natural capital</a>.</p>

<p>I appreciate that the predictions of the Heckscher-Ohlin Model often differ from 
empirical findings (eg the <a href="http://en.wikipedia.org/wiki/Leontief_paradox">Leontief Paradox</a>), but this question is about the model itself.</p>

<reference-request><international-trade><environmental-economics>
Generalization of the Heckscher-Ohlin Model
Adam Bailey
# Generalization of the Heckscher-Ohlin Model

(Asked by: username_0 on 2015-01-17)

The [Heckscher-Ohlin Model](http://en.wikewipedia.org/wiki/Heckscher%E2%80%93Ohlin_model) is normally presented for the case of 2 countries, 2 factors of production and 2 traded goods, leading to statements that, subject to free trade and various other assumptions:

1. A country with a relative abundance of a factor will specialize in
   and export the good whose production makes relatively intensive use
   of that factor (the Heckscher-Ohlin Theorem).
2. The return to a factor will be equalized between the countries (the
   Factor Price Equalization or Heckscher-Ohlin-Samuelson Theorem).

Do these results generalize, subject to the same assumptions, to cases with more than 2 countries, factors or traded goods, and what are good sources that treat this topic? Of particular interest are cases with 3 factors: labour, man-made capital and [natural capital](http://en.wikipedia.org/wiki/Natural_capital).

I appreciate that the predictions of the Heckscher-Ohlin Model often differ from
empirical findings (eg the [Leontief Paradox](http://en.wikipedia.org/wiki/Leontief_paradox)), but this question is about the model itself.

**Tags:** reference-request, international-trade, environmental-economics

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## 1 answers

### Answer by username_1 on 2015-01-20. Score: 7 | Accepted answer

The HO model has been generalised. Vanek does a good job of it.

Instead of only two countries, there is an index of countries.

* There are many industries.
* Identical technology
* Identical, homothetic tastes.

The HOV theorem states that if a country is abundant in a factor,
its factor content of trade in that factor should be positive, and
negative otherwise.

Empirically, this model is not that successful. [Here](http://www.nber.org/papers/w5625.pdf) is a good paper discussing the applications and results.

See below for that extension:
Vanek, Jaroslav, The Factor Proportions Theory: The N-Factor Case,” Kyklos, October 1968, 21, 749-755.


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