Disparities in Factor Endowments and Trade Patterns:A Heckscher-Ohlin Approach

Abstract

This article presents a methodology for estimating disparities in factor endowments within a dynamic Heckscher-Ohlin model, integrating a static approach to intraindustry trade of two goods and two factors. Using a Cobb-Douglas production function model, convergences and divergences in production levels are identified, influenced by the elasticity of substitution between inputs. The results show that, despite the equalization of factor prices, countries with different initial capital-to-labor ratios may experience convergence or divergence in income levels. This divergence can occur even in scenarios where convergence would be expected in both closed and open economies. Furthermore, the article emphasizes the importance of considering the relative intensity in the factor requirements of exported goods, highlighting comparative advantages in global trade. Finally, it suggests that technological differences between countries, although not explicitly considered in the paper, could be a relevant factor to explore in future research.

Received: 15 October 2023 / Accepted: 21 December 2023 / Published: 5 January 2024