Factor Proportions and Comparative Advantage in the Long Run

Abstract

The basic model of comparative advantage in the theory of international trade has been that associated with the names of Heckscher and Ohlin. The form in which this model has been analyzed over the last few decades has been in terms of the two-factor, two-good geometry developed by Lerner and Samuelson. All the six papers in the new Readings in International Economics (1967) under the section headed "The Theory of Comparative Advantage" are of this type. Recently the model has been extended in some interesting directions. Oniki and Uzawa (1965) have made one of the goods a capital good and studied the effect of accumulation and labor force growth on international equilibrium over time. Komiya (1967) has introduced a third nontrated good into the system and examined the consequences of this for various standard propositions of trade theory within the usual static context. Kenen (1965) has produced an ingenious model in which capital takes the form of augmenting the productivity of labor and land instead of being a separate "factor" in its own right. The present paper examines a model which combines the Oniki-Uzawa and Komiya features by making the third nontraded good a capital good. The main result is to show how factor proportions, and hence the pattern of comparative advantage, in the long run depend ultimately upon the values of two parameters, the propensity to save and the growth rate of the labor force.