Heckscher-Ohlin's Theory of International Trade and its Evaluation

Many theories in literature illuminate the international trade patterns of nations. Over time, economists have developed theories to explain the mechanisms of global trade. The Heckscher-Ohlin theory of comparative advantage was produced as an alternative to the Ricardian model of comparative advantage. It is also categorized under classical trade theories. The present paper focuses on the development and evaluation of the Heckscher- Ohlin theory of international trade. The HO model was produced by removing the labour theory of value and incorporating the price mechanism into international trade theory. The model overlooks other significant determinants of comparative advantage, including technological innovation, entrepreneurship, and institutional factors. Also, the theory does not fully account for the role of technology, transportation costs, consumer preferences, government policies, or other factors that can influence trade patterns. However, this theory is still relevant today in understanding global trade.