Specific factors model
In this model, labour mobility between industries is possible while capital is immobile between industries in the short-run. Thus, this model can be interpreted as a 'short run' version of the Heckscher-Ohlin model. The theory suggests that in case of an increase in the price of a good, the owners of the factor of production specific to that good will be able to profit in real terms. This model is ideal for particular industries.
New Trade Theory
New Trade theory explains several facts about trade, which the two main models above have difficulty with. These include the fact that most trade is to be done between countries with similar factor endowment and productivity levels, and the large amount of multinational production (i.e., foreign direct investment). In one example of this framework, the economy exhibits monopolistic competition.
Gravity model
The Gravity model of trade presents a more empirical analysis of trade rather than the more theoretical models above. The gravity model, in its basic form, predicts trade which is based on the distance between countries and the interaction of the countries' economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects.
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