The Heckscher-Ohlin-Samuelson Theorem

The Heckscher-Ohlin-Samuelson Theorem

International Factor Mobility Labor 0 1 2 3 4 5 6 7 8 9 10 11 Output 0 20 39 57 74 90 105 119 132 144 155 165 Marginal Product 20 19 18 17

16 15 14 13 12 11 10 In Home and Foreign there are two factors of production, land and labor, used to produce only one good. The land supply in each country and the technology of production are exactly the same. The marginal product of labor in each country depends on employment as shown in the Table. Initially, there are 11 workers employed in Home, but only 3 in Foreign. Find the effects of free movement of labor from Home to Foreign on employment, production, real wages, and the income of land owners in each country. Pre International Factor Mobility Home: Employment = 11 Production = 165 Real Wage Rate = 10 Real Wages = 110 Real Rent = 55 Labor 0 1

2 3 4 5 6 7 8 9 10 11 Output 0 20 39 57 74 90 105 119 132 144 155 165 Marginal Product 20 19 18 17 16 15 14 13

12 11 10 Pre International Factor Mobility Labor 0 1 2 3 4 5 6 7 8 9 10 11 Output 0 20 39 57 74 90 105 119 132 144 155 165 Marginal Product

20 19 18 17 16 15 14 13 12 11 10 Foreign: Employment = 3 Production = 57 Real Wage Rate = 18 Real Wages = 54 Real Rent = 3 Post International Factor Mobility Home: Employment = 7 Production = 119 Real Wage Rate = 14 Real Wages = 98 Real Rent = 21 Foreign: Employment = 7 Production = 119 Real Wage Rate = 14 Real Wages = 98 Real Rent = 21

Effects of International Factor Mobility Home: Employment = 11 Production = 165 Real Wage Rate = 10 Real Wages = 110 Real Rent = 55 Home: Employment = 7 Production = 119 Real Wage Rate = 14 Real Wages = 98 Real Rent = 21 Effects of International Factor Mobility Foreign: Employment = 3 Production = 57 Real Wage Rate = 18 Real Wages = 54 Real Rent = 3 Foreign: Employment = 7 Production = 119 Real Wage Rate = 14 Real Wages = 98 Real Rent = 21

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