Testing Rybczynski Theorem: An Evidence from The Selected European Transition Countries

Abstract

The goal of the paper is to test Rybczynski theorem in the case of selected European transition countries. Simple Heckscher-Ohlin model is extended in the analysis of many countries, two production factors and two products in the model. Assumptions of the theorem are conducted to scrutiny. The results of the analysis reject the hypothesis of the paper which states that “an increase in the endowment of one production factor, all other variables unchanged, will increase, by a greater proportion, the production of good that intensively uses that factor of production”. There is an existence of cointegration between input-output changes only in case of Poland. There are few key reasons why Rybczynski theorem does not hold in European transition countries: human capital and land as other factors of production, unemployment, increasing marginal costs of production, trade barriers, differences in technology among countries, product diversification and other factors related to globalization and liberalisation of world trade.

DOI: 10.5901/mjss.2013.v4n10p99