TD n. 610 2013

Yves Balasko.

The Heckscher-Ohlin model with arbitrary number of goods, factors and

countries (consumers) and no restrictions on factor trading is shown to be

equivalent to an exchange model whose goods are the productive factors while

consumer’s indirect demands for factors are derived from their actual demands

for consumption goods. This equivalence enables one to import properties like

the pathconnectedness of the equilibrium manifold, the uniqueness of equilibrium

for sufficiently small volumes of trade and discontinuities of equilibrium

selection maps for large volumes of trade into the Heckscher-Ohlin model.

This equivalence also provides the proper theoretical background to the important

but so far purely empirical role played in international trade by the

volume of net trades in factor contents.