Criticism against hechscher-ohlin type trade theories, International Economics

Assignment Help:

Criticism against Hechscher-Ohlin type trade theories is explained below:

The foremost criticism leveled against Hechscher-Ohlin type trade theories are that they views comparative advantage in the essentially static sense; that is if Pakistan is better at producing cotton and Japan better is at producing, then this situation will always exist. Critics argued that the comparative advantage can and should be viewed in a dynamic (time-varying) sense, and that it was not wise at all to rule out the possibility of Pakistan developing comparative advantage in cars in future.

Of course,  the  policy  advice  of  such  dynamic  comparative advantage theorists  was  very different from the above 6. These people argued that the countries build comparative advantage in the capital-intensive goods by protecting their domestic industries against the cheap industry manufactured imports from abroad. The protection is operationalised through tariffs which mean tax on imports or the outright quota restrictions. The output from the local infant industries then is used to substitute the imports of the manufactures. Various LICs (such as Mexico, India) consistently followed this policy prescription in the mid-20th century, but with the mixed results.

While it is true that number of countries pursued, fully or partly, the policy prescription suggested by the dynamic comparative advantage theories, only some of them were genuinely successful in changing their comparative advantage: Korea developed its comparative advantage in the auto industry, Malaysia in shipbuilding and consumer electronics, Taiwan in microchips, Brazil in light aircraft. Of these, most of the countries (like the East Asian tigers) had the marked export orientation in their industrialization and trade policies. This is what keeps them apart from the failures, which had a much more import-substituting approach to the industrialization..


Related Discussions:- Criticism against hechscher-ohlin type trade theories

Why do we observe the leontief paradox, Q. Why do we observe the Leontief ...

Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model

What effect do non-tradable goods have on ppp, What effect do non-tradable ...

What effect do non-tradable goods have on PPP? Answer:  The consequence is quite substantial.  In 1997 the production of non-tradable goods accounted for about 55% of U.S GNP.

Trade theory, what you do understand by the term effective rate of protecti...

what you do understand by the term effective rate of protection

Instruments of trade policy, It is argued that a tarriff may help promote e...

It is argued that a tarriff may help promote employment in a single industry, but is not likely to help employment in general

#title opportunity cost theory, review the general equilibrium conditions u...

review the general equilibrium conditions under autarky and given free trade using the opportunity cost theory of trade

report on internationally competing firms , Investment analysis report on ...

Investment analysis report on internationally competing firms Students will be organized randomly into small groups (typically 6), and will prepare an investment analysis of c

Explain u.s and european foriegn exchange flow chart, Us and European Forie...

Us and European Foriegn Exchange Flow chart Answer: The figure explicate how the money markets of two countries are linked through the foreign exchange market. The financial

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd