New Products and the Factor Content of International Trade

Abstract

This paper extends the multicommodity two-input version of the Heckscher-Ohlin model to include "new products," on which considerable interest has been focused by the product-cycle hypothesis and related analyses. The extended model is then used to reexamine the implications of relative factor abundance for the capital and labor content of international commodity trade. As this analysis shows, the presence of new products might in principle resolve the Leontief paradox under certain specific conditions.