Heckscher-Ohlin Theory and Individual Attitudes Towards Globalization

Kevin H. O’Rourke

The factor proportions theory of trade developed by Eli Heckscher and Bertil Ohlin is so intuitively appealing that it remains the bedrock of modern trade courses. Despite its popularity,however, doubts have persistently been raised about its empirical applicability, from the Leontief paradox (Leontief 1953) to the stylized facts (high levels of intra-industry trade; high levels of trade between similar countries) which motivated the development of new trade theory in the 1980s. In an influential paper which was particularly damaging to the theory’s credibility,Bowen, Leamer and Sveikauskas (1987) showed that the Heckscher-Ohlin-Vanek model was of no help when trying to predict the net factor content of a country’s trade.