Foreıgn Trade Deneme Sınavı Sorusu #1391171
Which one of the following assumptions of Heckscher-Ohlin Theory acknowledges that there is no factor-intensity reversal?
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Two countries, two commodities and two factors of production |
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One of the commodities is labor-intensive and the other one is capital-intensive in both countries |
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One of the countries is labor-abundant and the other one is capital-abundant |
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Technology is the same in both countries |
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There is constant returns to scale in the production of both commodities |
One of the commodities is labor-intensive and the other one is capital-intensive in both countries: This assumption acknowledges that there is no factor-intensity reversal. However, as we have already discussed in the previous chapter, factorintensity reversal is a factor that makes the Heckscher-Ohlin Theory invalid. Even though the studies show that the factor-intensity reversal rarely occurs, it is still an element that might impede the Heckscher-Ohlin Theory.
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