Relative Factor Abundance and Trade

Abstract

I develop a factor content of trade prediction for the Heckscher-Ohlin-Vanek model (HOV) that relates bilateral differences in country endowments to bilateral differences in factor contents. The results are striking. In comparisons of North-South factor contents or factor contents of countries with very different endowments (e.g., with very different capital-labor ratios), there is clear support for an HOV sign prediction. Thus countries with dissimilar endowment ratios also have very different factor content of trade differences as predicted by the HOV model.

Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research

“…the factor-contents theory that emerge when factor price equalization breaks down the factor-contents theory that emerge when factor price equalization breaks down (Debaere 2003;Choi and Krishna 2004). (Debaere 2003;Choi and Krishna 2004).…”

Unpacking sources of comparative advantage: A quantitative approach

“…The good fit of their model to the manufacturing trade data delivered an important piece of evidence on the role of productivity differences in determining comparative advantage (Eaton and Kortum, 2002;Costinot and Komunjer, 2007). 1 Separately, several studies have reaffirmed the role of factor endowments and the Heckscher-Ohlin framework, showing in particular that countries' relative endowments are informative of their pattern of trade (Debaere, 2003;Romalis, 2004). 2 Moving beyond this neoclassical focus, a recent cluster of work has identified the influence of country institutions on international trade.…”

Specialization, Gravity, and European Trade in Final Goods

“…As discussed in Debaere (2003), measuring world averages in relative supply-side country differences matters a lot. Therefore, in Tables 3 and 4 we employ the world wage and per capita GDP averages weighted by countries' populations, as comparable work force data are unavailable on the scale of our full sample.…”