Does the Rybczynski theorem also hold in modern trade theory models?

Question

Does the Rybczynski theorem also hold for modern Melitz (2003) type trade models?

score 6 · Accepted Answer · answered Mar 20 '23 at 14:15

The Rybczynski theorem is not directly applicable to the Melitz (2003) model, because the model the Rybczynski theorem is originating from, the Heckscher-Ohlin model, is built on different assumptions and focuses on different aspects of trade. The Heckscher-Ohlin model assumes that firms are identical within an industry and that there are constant returns to scale. In contrast, the Melitz model emphasizes firm heterogeneity and incorporates increasing returns to scale.

Thanks! In case you know, what would be the effect of an increase in the number of workers for melitz-type models? — Papayapap, Mar 20 '23 at 14:34

Does the Rybczynski theorem also hold in modern trade theory models?

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