Compare and contrast the predictions of the Heckscher-Ohlin and classical models about likely trading partners of various countries with the predictions of the Linder hypothesis

What will be an ideal response?


Both the classical and the HO models argue that the gains from trade emanate from different autarky relative prices. Consequently, differences in technology or factor endowments would seem to imply the possibility to exploit these gains. Linder argues that countries with similar standards of living (i.e. similar factor endowments or technologies) will produce similar types of goods and hence benefit by trading extensively, due largely to the availability through trade of an increased variety of goods.

Economics

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Economics