The Heckscher Ohlin Samuelson Theory of International Trade*
This paper builds up a neo classical trade model to explain the 'product cycle' hypothesis originally proposed by Raymond Vernon. As the skill intensity of a product falls over time, the more capital abundant North tends to export 'new' goods and the less developed South exports 'old' goods. The trade pattern remains invariant over time although the product mix changes as the 'new' goods become old, and this exhibits the product cycle type phenomenon. Thus, it is shown that, with reasonable assumpitons, the traditional factor abundance model is sufficient to generate a product cycle type trade pattern.