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Explain the Heckscher- Ohlin model of international trade and assess the extent to which this model provides useful insights into trade policy issues in developing countries.
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Explain the Heckscher- Ohlin model of international trade and assess the extent to which this model provides useful insights into trade policy issues in developing countries. International trade can be defined as the exchange of goods and services between one country and another, which arises due to the difference in relative costs of production between countries, it is also deemed to increase economic welfare of each country by widening the range of goods and services available of production. (The penguin dictionary of economics) The factor proportion model was developed by two Swedish neoclassical economists Eli Heckscher and Bertil Ohlin in the 1920's, in the model they try to explain why some countries are better at producing certain goods, and why the relative production costs are seen to vary between countries. Many economists believe that the classical economists cannot answer this question. Paul Samuleson provided many elaborations of the model after the 1930's, which...
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