What is the Heckscher-Ohlin Model?

The Heckscher-Ohlin model, otherwise known as the H-O model or 2x2x2 model, is a mathematical theory used in international trade to evaluate the export pattern of a country relative to the natural resources at their disposal. 

The model explains how resources are imbalanced throughout the world. It assumes that it is best for countries to export materials they can produce efficiently and in surplus. 

What Does the Heckscher-Ohlin Model Explain?

According to this model, countries generally export items that  they produce in abundance given their natural, land, labor and capital endowments. 

Thus, countries that have certain resources in abundance tend to have a comparative advantage over countries that do not have these resources.

What Developed the Heckscher-Ohlin Theory?

The Heckscher-Ohlin model was developed in the 1930as by two Swedish economists, Eli Heckscher and Bertil Ohlin.  

The original work that led to the development of the Heckscher-Ohlin model was a paper written in 1919 by Swedish economists, Eli Heckscher at the Stockholm. The model was subsequently expanded in the 1930s.

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How is the Heckscher-Ohlin Model Used?

In international trade, the model is also used to evaluate the equilibrium of trade between two countries given their different production capabilities and natural resources.

The Heckscher-Ohlin model maintains that the specific natural resources that a country has would give it an advantage in producing related goods. 

The Heckscher-Ohlin model is not limited to natural resources or commodities, it also accounts for factors of production such as labor, land and capital and how they affect exportation.

The Heckscher-Ohlin model helps to find a trade balance between the two countries involved in international trade.

Related Topics

• Trade Balance: Surplus and Deficit
• Mercantilism
• J Curve
• National Trade Data Bank
• Capital Account (Economics)
• Merchandise Trade Balance
• Current Account 
• Income Payments
• Unilateral Transfer
• Is it better to have a trade surplus or a trade deficit? 
• Export of Goods and Services and Percentage of GDP
• Heckscher-Ohlin Model 
• Linder Hypothesis
• The Balance of Trade as a Balance of Payments
• National Savings and Investment Identity
• Circular Flow of Money
• Financial Capital
• Supply and Demand Sides for Financial Capital? 
• Flow of Capital
• Domestic Saving and Investment Determine the Trade Balance
• National Savings Identity and Trade Deficits
• How the Business Cycle Affects Trade Balances
• Trade Balance or Trade Surplus
• Level of Trade
• Comparative Advantage
• Absolute Advantage
• Specialization and Gain from Trade
• Absolute Advantage in All Goods
• Production Possibilities Frontier and Comparative Advantage
• Comparative Advantage and Mutually Beneficial Trade
• Gain from Trade
• Opportunity Costs and International Trade
• Intra-Industry Trade
• Splitting Up the Value Chain
• How Economies of Scale Lead to Trading Advantages
• Protectionism
• Closed Economy
• Tariffs 
• Double Column Tariff
• Import Quotas
• Double Column Tariff
• Infant Industry Theory
• National Interest Argument
• Race to the Bottom
• Anti-Dumping Laws
• Dumping
• Trade War
• Race to the Bottom
• Non-Tariff Barriers
• Effects of Trade Barriers
• Who Is Benefited and Who is Harmed by Protectionism?
• Infant Industry Theory for Restricting Imports
• What is the Anti-Dumping Argument for Restricting Imports?

• Anti-Dumping Laws
• Dumping

• What is the Environmental Protection Argument for Restricting Imports?
• Race to the Bottom
• Unsafe Consumer Products Argument for Restricting Imports?
• National Interest Argument for Restricting Imports
• What is the WTO?
• What is the GATT?
• What are Free Trade Agreements?
• North American Free Trade Agreement
• Central European Free Trade Agreement
• General Agreement on Free Tariff and Trade (GATT)
• Common Market
• Common Market for Eastern and Southern Africa
• Central American Common Market
• Caribbean Community and Common Market
• What are Economic Unions?
• WTO
• International Monetary Fund
• World Economic Forum
• Inter-American Development Bank
• Davos World Economic Forum 
• Chamber of Commerce
• Jackson Hole Economic Symposium