School of Economics | The Heckscher–Ohlin model (H–O model)
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Basic situation: Two identical countries (A and B) have different initial factor endowments. Autarky equilibrium ( ): no trade, individual production equals consumption. Trade equilibrium: both countries consume the same ( ), especially beyond their own Production–possibility frontier; production and consumption points are divergent. The Heckscher–Ohlin model (H–O model) is a general equilibrium mathematical model of international...