S/E/11. The Heckscher-Ohlin model of international trade, theory and predictions.

This essay will begin by setting the Heckscher-Ohlin model of international trade. I will use this model to explain its main predictions. The model predicts that an economy will have a comparative advantage in the production of goods that are intensive in the factors with which they are abundantly endowed. This comparative advantage will enable the country to export goods that use these factors intensively in production. Another important prediction the model makes is that of complete factor price equalisation between countries that are trading partners. The essay will attempt to prove this.