chapter  4
19 Pages

Factor Movements

The Heckscher-Ohlin analysis has been further developed by P. A. Samuelson, who specified the conditions of complete factor-price equalization through commodity trade for the case of two countries, two commodities, and two factors, and later extended the analysis for a more general framework.5 In the ensuing controversy,6 the conclusion has been reached that the conditions for the equalization of factor prices through commodity movements are so restrictive that they are not likely to be fulfilled, even approximately, in the real world. Nevertheless, even though the prices of productive factors are not equalized, the question remains: Will trade lead to less inequality in regard to factor prices?