International Economics

In modern times, the Ricardian pure theory of international trade was reformulated by American economist Paul Samuelson, improving on the earlier work of two Swedish economists, Eli Heckscher and Bertil Ohlin. The so-called Heckscher-Ohlin theory explains the pattern of international trade as determined by the relative land, labour, and capital endowments of countries: a country will tend to have a relative cost advantage when producing goods that maximize the use of its relatively abundant factors of production (thus countries with cheap labour are best suited to export products that require significant amounts of labour).