The heckscher-ohlin theorem and the Mexican economy. A critical view of neoliberal economics

Abstract

Neoclassical trade theory is largely based on the Heckscher-Ohlin (H-O) theorem. This proposition has survived all criticisms for many decades, and it is still the basis for orthodox free market trade policies. The theorem has been tested by various methodologies under different scenarios; still, the most cited test was conducted by Wassily Leontief for the U. S. economy using its 1947 input-output table. His results contradicted the theorem's predictions, which originated the so called “Leontief paradox”. We test the H-O theorem as applied to the Mexican economy to find out whether the economic strategy of free trade has bolstered Mexico's comparative advantages based on its relative factor endowments, as the theorem maintains. Our results clearly show that the H-O theorem does not apply to Mexico in the period that follows the trade liberalization.