Foreign Trade and Exchange Rates: Eli Heckscher's theoretical contributions to international economics

The article analyzes Eli Heckscher's two theoretical contributions in international economics: the foundations of the Heckscher-Ohlin theorem and the factor prize equalization theorem in 'The Effect of Foreign Trade on the Distribution of Income' (1919) and his criticism of Gustav Cassel's purchasing power parity approach to the determination of exchange rates in 'The Basis of the Exchange Rate under the Paper Standard' (1916). The contributions are viewed against the modern perspective - Heckscher as a source of inspiration - in order to compare what Heckscher himself wrote with the latter-day conventional wisdom.