Rybczynski's Theorem in the Heckscher-Ohlin World - Anything Goes

6 Pages Posted: 23 Jan 2010

See all articles by Marcus M. Opp

Marcus M. Opp

Stockholm School of Economics - Department of Finance; Swedish House of Finance

Hugo Sonnenschein

Stanford University - Department of Economics

Christis Tombazos

Monash University - Department of Economics

Date Written: May 19, 2009

Abstract

We demonstrate that Rybczynski’s classic comparative statics can be reversed in a Heckscher-Ohlin world when preferences in each country favor the exported commodity. This taste bias has empirical support. An increase in the endowment of a factor of production can lead to an absolute curtailment in the production of the commodity using that factor intensively, and an absolute expansion of the commodity using relatively little of the same factor. This outcome - which we call “Reverse Rybczynski” - implies immiserizing factor growth. We present a simple analytical example that delivers this result with unique pre- and post-growth equilibria. In this example, production occurs within the cone of diversification, such that factor price equalization holds. We also provide general conditions that determine the sign of Rybczynski’s comparative statics.

Keywords: Rybczynski theorem, Heckscher-Ohlin, Factor endowments, Immiserizing growth, Transfer paradox

JEL Classification: F11, D51, D33

Suggested Citation

Opp, Marcus M. and Sonnenschein, Hugo and Tombazos, Christis G., Rybczynski's Theorem in the Heckscher-Ohlin World - Anything Goes (May 19, 2009). Journal of International Economics, Vol. 79, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=1540122

Marcus M. Opp (Contact Author)

Stockholm School of Economics - Department of Finance ( email )

SE-113 83 Stockholm
Sweden

Swedish House of Finance

Drottninggatan 98
111 60 Stockholm
Sweden

Hugo Sonnenschein

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Christis G. Tombazos

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

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