Classical: constant opportunity cost

Neoclassical: decreasing opportunity cost

Example: US and Germany
 

Heckscher-Ohlin Theory (Factor Proportions Theory)
 

 Trade According to the H-O Theory:

 Rybczynski Theorem

Relax the Assumptions of H-O Theory
 

 1. Demand Reversal

 2. Reversal of factor intensity

3. Changing technology 

      Product Cycle Theory
 
                                                           Other industrially
        Innovating Country (US)             advanced country                          Less Developed Country

 
4. Employees not always employed
 
    Specific Factors Model

5. Factor supplies changing
 
     Immiserizing growth
 

 1) neutral growth:                              2) only abundant factor growth
     both factors of production
     grow at the same rate
 

   3) abundant factor growing        4) scarce factor growing           5) only scarce
        more rapidly                               more rapidly                             factor growth
        than scarce factor                      than abundant factor

 
 
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