SPECIFIC FACTORS AND HECKSCHER-OHLIN: AN INTERTEMPORAL BLEND

A blend of the Specific Factors and Heckscher-Ohlin models can be fashioned, making use of some of the ideas in the earlier vintage capital literature. At any given time, production in many sectors reflects past decisions to create sector-specific capital in those sectors. In addition, current capital formation can be focused on one or two best sectors depicted by the Hicksian composite unit-value isoquant. Thus, international trade concentrates current investment decisions and yet allows a variety of goods to be produced.