The Application of Toy Economic Models to the Analysis of Globalization

A Toy Model is a simple economic model, with no claims to generality. These models are usually constructed for some specific purpose. That was the origin of the famous trade model, the Heckscher-Ohlin-Samuelson (HOS) Model, originally constructed to model Nineteenth Century transatlantic trade. Despite its simplicity, the HOS model is often invoked in discussions of globalization. This paper reviews such applications, including the version of the HOS model promoted by Wood (1994). It is argued that a three-factor two-good toy model with a specific factor in one sector represents a significant improvement on existing toy models for the analysis of globalization.