The Linder hypothesis, which is sometimes called the ‘demand-similarity’ hypothesis, essentially shifts the emphasis from the supply side to the demand side. The traditional Heckscher-Ohlin theory finds the cause of trade in the supply side (mainly in terms of product attributes and country characteristics). It neutralises the effects of demand with the aid of the assumption of homotheticity of internationally identical preferences. Linder (1961) accepts that the HOS theory adequately explains international trade in primary products but claims that it does not explain trade in manufactured products.
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- The Linder Hypothesis
- Macmillan Education UK
- Chapter 24
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