Question

What is the Ricardian model and H-O theory?

Explain the differences of above with case studies explaining international trade patterns among two countries.

300 Words.

Answer 1

1.Ricardian model describes "a world of competitive production, labor and production from a single component that uses different technologies of continuous income to scale in all countries and commodities".

2.

H-O theory is an "economic theory that implies  that countries should export what they'll produce more efficiently and abundantly."

​​​INTERNATIONAL TRADE PATTERNS AMOUNG TWO COUNTRIES(Richardian model and H-O theory)

Richardian modern international trade:-

The focus is on comparative gain. The Richardian model shows that countries have special experience in the production of goods and services that can be performed in the best possible way.it assumes that  that there is only one component of production, that is, labor. Indicates that trade between countries is caused by technological differences due to differences in labor productivity.

This applies in the short term, because technology can change internationally over time.
In short, the Ricardian model assumes that two countries produce two goods, with a production component, usually labor. This model is a generally balanced model that is perfectly competitive in all markets.

The commodities that are produced are considered uniformly within the institutions within an industry in all countries. Goods can be exported free of charge between countries. Although the labor force is uniform within a country, there may be different productivity between countries. This indicates that production technology varies between countries.Labor in mobile industries in one country is expensive, but dynamic in all countries. The entire workload is estimated. Workers are calculated to maximize profit subject to income limitation

Heckscher - Ohlin model theory:-

Unlike the Ricardian model, the production model proposed by H-O consists of two components, namely, labor and capital.
Due to the relative size differences of each component, one country is relatively better than the other. The H-O model suggests that countries should produce and export goods using abundant resources.Similarly, countries need to import goods that require their resources.This model differs from the comparative theory of achievement, which focuses on the efficiency of the production process.

In very general terms, countries with more capital will specialize in capital-intensive goods and countries with more labor will specialize in labor-intensive goods. These countries will exchange these goods with each other. Model H-O
 assumes that labor and capital can flow freely between sectors and that the amount of these two factors differ from country to country

The H-O model indicates that there will be a redistribution of wealth between the labor of capital and the owners.