Hecksher's theory, giving it more support and a wider audience. Ohlin won the Nobel Memorial Prize in Economic Sciences in 1977 long after Heckscher's death. Heckscher–Ohlin theorem The Heckscher–Ohlin Theorem, which is concluded from the Heckscher–Ohlin model of international trade, states: trade between countries is in proportion to their relative amounts of capital and labor. In countries with an abundance of capital, wage rates tend to be high; therefore, labor-intensive products, e.g. textiles, simple electronics, etc., are more costly to produce internally. In contrast, capital-intensive products, e.g. automobiles, chemicals, etc., are less costly to produce internally. Countries with large amounts of capital will export capital-intensive products and import labor-intensive products with the proceeds. Countries with high amounts of labor will do the reverse. The following conditions must be true: The major factors of production, namely labor and capital, are not available in the same proportion in both countries. The two goods produced either require more capital or more labor. Labor and capital do not move between the two countries. There are no costs associated with transporting the goods between countries. The citizens of the two trading countries have the same needs. The theory does not depend on total amounts of capital or labor, but on the amounts per worker. This allows small countries to trade with large countries by specializing in production of products that use the factors which are more available than its trading partner. The key assumption is that capital and labor are not available in the same proportions in the two countries. That leads to specialization, which in turn benefits the country's economic welfare. The greater the difference between the two countries, the greater the gain from specialization. References Sources Bertil Ohlin, "Heckscher, Eli Filip", Svenskt biografiskt lexikon, vol. 18, pp. 376–381. Further reading Carlson, Benny, and Lars Jonung. "Knut Wicksell, Gustav Cassel, Eli Heckscher, Bertil Ohlin and Gunnar Myrdal on the role of the economist in public debate." Econ Journal Watch 3.3 (2006): 511+ online. Coleman, Donald Cuthbert, "Eli Heckscher and the idea of mercantilism." Scandinavian Economic History Review 5.1 (1957): 3–25 online. Hasselberg, Ylva. "Networks and Scientific Integrity: Eli Heckscher and the Construction of Economic History in Sweden, 1920–1950." Scandinavian Economic History Review 54.3 (2006): 273–290. Eli Heckscher, International Trade, and Economic History, Findlay, Ronald, Rolf G. H. Henriksson, Håkan Lindgren and Mats Lundahl, eds., The MIT Press, 2007. External links 1879 births 1952 deaths