ABSTRACT
This chapter discusses the proofs of the Heckscher-Ohlin theorem in the two-commodity case. In addition, it extends the analysis to many countries and many commodities, and it points out some differences between the Classical and the Heckscher-Ohlin theories. Similarity of tastes and homotheticity are sufficient for the Heckscher-Ohlin theorem. To show that the Heckscher-Ohlin theorem is true, it must be demonstrated that the country which produces X relatively more cheaply in the pretrade equilibrium state is necessarily the labor-abundant country, with factor abundance decided on the basis of the price definition. One of the crucial assumptions of the Heckscher-Ohlin theorem is that production functions are identical between countries. The Heckscher-Ohlin theorem assumes that tastes are largely similar between countries, which appear to be a stronger assumption. The Heckscher-Ohlin theorem postulates the identity of production functions between countries and attributes comparative advantage to differences in factor proportions.
