CID Working Paper No. 9

An Inframarginal Analysis of the Heckscher-Olin Model with Transaction Costs and Technological Comparative Advantage

Wen Li Cheng, Jeffrey D. Sachs, and Xiaokai Yang

April 1999

Abstract

In the paper we introduce technological comparative advantage and transaction costs into the Heckscher-Olin (HO) model and refine the HO theorem, the Stolper-Samuelson theorem, the Rybczynski theorem, and factor equalization theorem. The refined core theorems can be used to accommodate recent empirical evidence that is at odds with the core theorems.

Keywords: H-O theorem, factor equalization theorem, Stolper-Samuelson theorem, Rybczynski theorem

JEL codes: F10, F11

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