3. in production pattern within each trading country.

3. H-O theory is a static one. It needs an extension in which long term changes in factor endowments of trading countries arc taken into account. 4. By definition, factor mobility between alternative employments is not possible in the short run, while international trade necessitates factor mobility and an associated change in production pattern within each trading country.

5. H-O faces a difficult when trading economies have different levels of development. This is because H-O theory assumes “equal tastes”.

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Factually, however, economic growth leads to changes in consumer tastes and preferences also. As we have seen above, differences in tastes can distort the conclusions of H-O theory. There can even be a reversal of trade flow. 6. As in the case of classical theory, H-O theory is not able to take into account several ground realities like outsourcing by—producers, product differentiation, non-price competition, trade policies pursued by authorities, and so on. 7. H-O theory does not take into account long term changes in factor endowments, technological innovations, changes in the productivity of factors, reversal of factor-intensity of products, and the like.

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