Question

Both Bertil Ohlin (1977) and Paul Krugman(2008) won the Nobel Prize in Economics for their pathbreaking contribution to the theory of international trade. Please compare their analysis of trade patterns.( (Hint: What’s the difference between the H-O model and the trade based on economies of scale?)

Answer 1

Difference on the basis of H-O model

• In Bertin ohlin , H-O model is used to emphasize on the trade and specially on the equilibrium of trade In between two countries who have varying speciality and natural resources
• In paul krugman , Ho model was given on the basis of monopolistic firm which show that trade is given by economies of scale which is internal to the firms

Trade based ecnomies of scale

• paul krugaman , argues that trade allows countries to be specialised in very limited variety of production which results in increasing return that is ecnomies of scale
• Bertin ohlin , argues that patterns of trade depends upon the activities performed by the countries which gives you the constant return to the scale