ABSTRACT
This chapter deals with the concepts of factor intensity and factor abundance. It discusses the Heckscher–Ohlin theorem. The Hecksche–Ohlin theorem asserts that a country exports that commodity which uses relatively more intensively its abundant factor, while Lancaster's definition calls abundant that factor which is being used more intensively by the exported commodity. On the basis of Lancaster's definition, the Heckscher–Ohlin theorem is by definition true—and it can never be refuted. It is interesting to note that, on the basis of Lancaster's definition and when the ranking of commodities in terms of factor intensity is contradictory between countries, both countries are considered abundant in the same factor. If the overall factor proportions of both countries fall in the same cone, then a unique classification of commodities in terms of factor intensity holds for both countries. If the overall factor proportions of the two countries lie in different cones, the ranking of commodities are contradictory between countries.
