1. In particular, the Heckscher–Ohlin theory remains ubiquitous in the relevant theory. According to this factor-proportions theory of comparative advantage, international commerce compensates for the uneven geographical distribution of productive resources. The fundamental insight of the Heckscher–Ohlin model is that traded commodities are really bundles of factors (land, labour and capital). The international exchange of commodities is therefore indirect factor arbitrage, transferring the services of otherwise immobile factors of production from locations where these factors are abundant to locations where they are scarce. Under some circumstances, this indirect arbitrage can completely eliminate factor-price differences. The most important implication of the Heckscher–Ohlin theory is that the option to sell factor services externally (through the exchange of commodities) transforms a local market for factor services into a global market. As a result, the derived demand for inputs becomes much more elastic, and also more similar across countries. For discussion, see E.E. Leamer, The Heckscher—Ohlin Model in Theory and Practice (1995);
2. E.E. Heckscher and B. Ohlin, Heckscher–Ohlin Trade Theory (1991);
3. D.R. Davis, D.E. Weinstein, S.C. Bradford and K. Shimpo, The Heckscher—Ohlin—Vanek Model of Trade: Why Does it Fail? When Does It Work? (1996).
4. I.S. Johnston, ‘Law, Economics, and Post-Realist Explanation’ (1990) 24 (5) Law & Society Review 1217, 1221.
5. S. Hymer, The International Operations of National Firms (1976).