Heckscher-Ohlin theory and its assumptions

 HECKSHERS OHLIN THEORY:

in economics,  according to a theory of comparative advantage in international trade, countries in which capital is relatively intensive and labour relatively scarce will tend to export capital-intensive products and import labour-intensive products, while countries in which labour is relatively intensive and capital relatively scarce will tend to export labour-intensive products and import capital-intensive products.
      The theory was developed by the Swedish economist Bertil Ohlin (1899–1979) on the basis of work by his teacher the Swedish economist Eli Filip Heckscher (1879–1952). 

Assumptions of Heckser ohlin theory:

The ohlin theory has  following assumptions:

1.It is a  ssumed that there are only two nations (1 and 2) with two goods for trade (X and Y) and two factors of production (capital and labour).

2.For producing the goods, both nations use the same technology and they use uniform factors of production.

3.In both countries, good X is labour intensive and Y is capital intensive.

4.The tastes and preferences of both nations are the same (both countries can be represented in the same indifference curve).

5. In both nations, the assumption of constant returns to scale is applicable for the production of goods X and Y.

6.In both nations, specialization in production is not complete.

7.Goods and factor markets in both nations are perfectly competitive.

8.There exists perfect mobility of factors of production within each country though international mobility is not possible.