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International Trade Essay Hecksher-Ohlin Trade Theory In the following essay I will look at how effectively the Hecksher-Ohlin trade theory explains trade flows between the economies of advanced industrialised countries and also what alternative theories may be considered. To explain this I will look at the basic Hecksher-Ohlin model, the assumptions that it holds and also other theorists who have attempted to make this trade theory better. The Hecksher-Ohlin model is an extension of the classical comparative advantage theory of free trade. To begin analysing the model we need to first establish the assumptions which are related with it. The assumptions we are going to make are additional to those previously created for the classical Ricardian model. They simply cover the following factors: skilled and unskilled workers, trade patterns, factor mobility and domestic factor prices. The first assumption I will look at is taken from Husted and Melvin (2004), "There are two factors of production:...

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