Two Theorems in Comparative Statics: The Rybczynski Theorem and the Findlay-Grubert Theorem

Abstract

While discussing the HOS theorem earlier, in Chapter 8, it was assumed (1) that the endowments of capital (K) and labour (L) were given and fixed, and (2) that the state of technology was given and fixed. This chapter discusses the results which are obtained by eschewing these assumptions. Rybczynski (1955), in a classic paper, discusses the impact of a change in the endowment of a factor on the sectoral levels of output and on the inter-industry terms of trade (relative price). The result obtained regarding the levels of sectoral output has come to be known as the Rybczynski theorem. On the other hand, Findlay and Grubert (1959), in another classic paper, discuss the impact of technological progress in one sector on the sectoral levels of output at constant inter-industry terms of trade (relative price). The result obtained regarding the levels of output has come to be known as the Findlay-Grubert theorem. Both these theorems, which have nothing specifically to do with the pure theory of international trade, are direct contributions to the general equilibrium theory although the use of these theorems has enriched trade theory in analysing the impact of capital accumulation and technological progress on international trade.