Heckscher-Olin Theory and Non-Competitive Markets

Abstract

This paper derives statements of the Heckscher-Ohlin Theorem which remain valid in the presence of market power. Following Helpman (1 984a), the paper explores restrictions on permissible trade patterns that are implied by the post-trade equilibrium conditions of Heckscher- Ohlin theory. Restrictions on the patterns of commodity trade are derived to complement Helpman's factor content version of the competitive Heckscher-Ohlin theory, and the introduction of factor market power is shown to leave the validity of these restrictions unaffected, Restrictions on the pattern of Heckscher-Ohlin trade in the presence of product market power are also derived, and conditions are stated under which Helpman's competitive factor content restrictions continue to hold.