Implications of Many Industries in the Heckscher-Ohlin Model

Abstract

This paper examines the implications of many industries on the Heckscher-Ohlin (HO) model. Available empirical studies suggest that output prices are interdependent. When output prices are interdependent, the HO Theorem obtained in the 2 * 2 case generally does not hold in the multi-commodity world. It is shown that mean Stolper-Samuelson elasticities as well as the mean Rybcyznski effects would become negligible as the number of industries increases. Due to output indeterminacy, exports of a capital-abundant country need not be more capital intensive than imports. Leontief's two empirical studies on U.S. trade patterns were invalid tests of the HO predictions that were derived from the 2 * 2 model. Thus, the so-called Leontief Paradox may be commonly observed. The main results of the 2 * 2 HO model are peculiarities that have little relevance to the real world with many industries.