What does the Heckscher theory postulate? Which force do Heckscher and Ohlin identify as the basic determinant of comparative advantage and trade? Explain.

The Heckscher-Ohlin theory, often referred to as the H-O model, builds upon Ricardo's theory of comparative advantage by explaining its origins. It posits that a country will export goods that intensively use its relatively abundant and cheap factors of production and import goods that intensively use its relatively scarce and expensive factors of production.

For example, a country with an abundance of labor and scarcity of capital would have a comparative advantage in producing labor-intensive goods, such as textiles or apparel. Conversely, a capital-abundant country would specialize in and export capital-intensive goods, such as machinery or chemicals. The theory assumes that countries have identical production technologies and consumer preferences, with trade arising solely from differences in factor endowments.

The H-O theory, therefore, explains that a nation's comparative advantage is determined by its national factor endowments, leading to specialization and mutually beneficial international trade as countries leverage their relative strengths in factor abundance.