John Gilbert's Excel Model

Factor Proportions Models with Free Trade
Model with Trade Policy

These are Excel files containing versions of the Heckscher-Ohlin (i.e., Factor Proportions) trade model that you can manipulate yourself to see how the parameters of the model cause equilibrium, and the diagrams representing it, to change. They were created by John Gilbert at Utah State University.

Using the Files

To use these, you will need to open them into the Excel spreadsheet program, and then be able to use Excel's "Solver," which may not already be installed in your copy of Excel. Do the following:
  1. Instead of opening the file within your browser by double clicking it, download it to your hard drive. (Right-click on the file above, and use "save target as," "save link as," or some such.)
  2. Run Excel from your desktop, and then open the file from your hard drive.
  3. If "Solver" does not appear under "Tools," go to Tools/Add-Ins and check the box for Solver Add-In.

Manipulating the Model

Cells of the spreadsheet that appear in white can be changed and will cause some immediate changes in some of the diagrams. However the equilibrium that is depicted will not change until you also ask Excel to solve the model. You do this by using Tools/Solver/Solve, at which point it will first report whether a solution was successfully found (it isn't always, if you ask for the impossible). Then, when you click OK, it will redraw the figures to represent the new equilibrium.

Most of the figures are like what we have used in class, including the unit-value-isoquent (Lerner) diagram, the production (Edgeworth) box, and the output-space equilibrium (PPF) diagram.

In all models you can change the endowments of capital and/or labor, their cost shares in the X and Y industries representing factor intensities (the production functions are Cobb-Douglas), technology shift parameters, and the expenditure shares in consumption representing preferences (also Cobb-Douglas). The Single Economy model represents a small-open economy for which prices are given, and you can specify these as well. The Dual Economy models depict a world of two countries with technologies, preferences, and factor endowments that are initially identical but can be changed. The Model with Trade Policy, in a separate file, is a small open economy in which you can also specify a tariff or subsidy on international trade.