Bertil Ohlin

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In 1933 Ohlin published a work that made him world-renowned, Interregional and International Trade. Ohlin built in it an economic theory of international trade from earlier work by Heckscher and his own doctoral thesis. [1] It is now known as the Heckscher–Ohlin model, one of the standard model economists use to debate trade theory.

The model was a breakthrough because it showed how comparative advantage might relate to general features of a country's capital and labor, and how those features might change through time. The model provided a basis for later work on the effects of protection on real wages, and has been fruitful in producing predictions and analysis; Ohlin himself used the model to derive the Heckscher–Ohlin theorem, which predicts that capital-abundant countries export capital-intensive goods, while labor-abundant countries export the labor-intensive goods.

The Heckscher–Ohlin Theorem, which is concluded from the Heckscher–Ohlin model of international trade, states: trade between countries is in proportion to their relative amounts of capital and labor. In countries with an abundance of capital, wage rates tend to be high; therefore, labor-intensive products, e.g. textiles, simple electronics, etc., are more costly to produce internally. In contrast, capital-intensive products, e.g. automobiles, chemicals, etc., are less costly to produce internally. Countries with large amounts of capital will export capital-intensive products and import labor-intensive products with the proceeds. Countries with high amounts of labor will do the reverse.

The following conditions must be true:

The theory does not depend on total amounts of capital or labor, but on the amounts per worker. This allows small countries to trade with large countries by specializing in production of products that use the factors which are more available than its trading partner. The key assumption is that capital and labor are not available in the same proportions in the two countries. That leads to specialization, which in turn benefits the country's economic welfare. The greater the difference between the two countries, the greater the gain from specialization.

Wassily Leontief made a study of the theory that seemed to invalidate it. He noted that the United States had a lot of capital; therefore, it should export capital-intensive products and import labor-intensive products. Instead, he found that it exported products that used more labor than the products it imported. This finding is known as the Leontief paradox.

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Significant publications

Interregional and international trade, 1933 Ohlin - Interregional and international trade, 1933 - 5175280.tif
Interregional and international trade, 1933


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  1. 1 2 3 Carlson, Benny (2018). "Swedish Economists in the 1930s Debate on Economic Planning". Springer: 38–39. doi:10.1007/978-3-030-03700-0. ISBN   978-3-030-03699-7.
  2. "Berth Ohlin's Contributions to Economic Theory" (PDF).
  3. Findlay, Ronald; Jonung, Lars; Lundahl, Mats (2002). Bertil Ohlin: A Centennial Celebration, 1899–1999. MIT Press. ISBN   978-0262062282.
  4. Toporowski, J. (2013). Michał Kalecki: An Intellectual Biography: Volume I Rendezvous in Cambridge 1899–1939. Springer. ISBN   978-1137315397.
  5. Louis W. Pauly (December 1996), "The League of Nations and the Foreshadowing of the International Monetary Fund", Essays in International Finance, Princeton University, 201, SSRN   2173443
  6. Sköldenberg, Bengt, ed. (1969). Sveriges statskalender. 1969 (PDF) (in Swedish). Stockholm: Fritzes offentliga publikationer. p. 152. SELIBR   3682754.

Further reading

Bertil Ohlin
Bertil Ohlin
Minister of Commerce and Industry
In office
Party political offices
Preceded by Chairman of the People's Party
Succeeded by
Political offices
Preceded by Minister of Commerce and Industry
Succeeded by
Preceded by Laureate of the Nobel Memorial Prize in Economics
Served alongside: James E. Meade
Succeeded by