Archive | Factor-Intensity Reversal

In this article we will discuss about the factor-intensity reversal of commodities. The Hecksher-Ohlin theorem rests upon the assumption that the production functions are different for different commodities but these are identical for each commodity in the two countries. Suppose there are two commodities steel and cloth. Steel is capital-intensive (high capital-labour ratio) and cloth is labour-intensive (low capital-labour ratio). [...]