Richardo-viner

The Richardo-Viner model, also known as the specific factors model, is an extension of the Ricardo model used in trade theory. It was due to Jacob Viners interest in explaining the migration of workers from the rural to urban areas after the Industrial revolution. Unlike the Richardian model, the specific factors model allows for the existence of factors of production besides labor. In other words, labor is mobile, while the two other factors of production is immobile (sector specific).

Assumptions of the model

The economy in this model consists of two countries, two goods and three factors of production. The two countries can only trade goods, not factors of production.

Here only the mobile production factor (labor) can be used in the production of both goods and can therefore move between sectors. In the use of labor, there will normally be diminishing returns to scale; holding all the other factors of production constant, an increase in labor will mean less of the other factor per worker and in turn each additional worker will add less production than the last.

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