Should direct or total factor intensities be used in tests of the factor proportions hypothesis?

Hamilton, Carl; Svensson, Lars E. O.

doi:10.1007/bf02706519

Cited by 18 publications

(5 citation statements)

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“…This article, by contrast, focuses on the more traditional implications as stressed by DW. Hamilton and Svensson (1983) show it is total as opposed to direct factor intensities that are relevant for explaining trade flows, an observation consistent with the findings of this article. They do not go beyond this initial step to address the issues described above, however.…”

Section: Introductionsupporting

confidence: 90%

Global production sharing and trade in the services of factors

Reimer

2006

Journal of International Economics

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Section: Introductionsupporting

confidence: 90%

Global production sharing and trade in the services of factors

Reimer

2006

Journal of International Economics

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“…hand, work by Hamilton and Svensson (1983) and Deardorff (1984) favors computation of total requirements in more general circumstances. The latter approach is likely more appropriate for the United States.…”

Section: Methodology and Data Sourcesmentioning

confidence: 99%

The composition of the human capital stock and its relation to international trade: Evidence from the US and Britain

Maskus¹,

Sveikauskas²,

Webster³

1994

Weltwirtschaftliches Archiv

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“…It is clear that intermediate inputs are important (indirect factor intensities). Deardofff (1982) and Hamilton and Svensson (1983) have shown that total (direct plus indirect) factor intensities should be used in calculating the factor content of trade. We empirically calculate direct plus indirect factor input requirements by taking a weighted average of the distributive shares of capital from all activities, including activities taking place in the industry in question, that are used in the production of industry h.…”

Section: Data Empirical Methods and Resultsmentioning

confidence: 99%

The factor content of net trade for the OECD countries

Torstensson

1995

Journal of Economic Studies

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IntroductionIn the traditional Heckscher-Ohlin theory the factor content of net trade is determined by inter-country differences in relative factor endowments. The Heckscher-Ohlin-Vanek (HOV) theorem shows that countries will have an embodied net export of factors in which they have an abundant relative endowment and a net import of factors in which they have a scarce relative endowment (see Vanek, 1968). Although scale economies are another cause of trade in more recent theories, the HOV theorem is upheld and the factor content of net trade is still determined by differences in relative factor endowments (see Helpman and Krugman, 1985, pp. 261-2).This article examines the predictions of the theorem on each and every Organization for Economic Co-operation and Development (OECD) country's net trade in 1986. There have been several empirical tests of the HOV theorem. Early studies mostly examined only one country, usually the USA [1]. Recently, however, there have been a few multi-country studies (Baldwin, 1979;Bowen et al., 1987;Clifton and Marxsen, 1983). This study differs from most earlier multicountry studies in three ways. First, it examines a more recent year. Whereas earlier studies have mainly analysed trade flows in the 1960s or early 1970s, this article examines trade in 1986 [2].Second, this study examines trade in a framework with two factors of production where capital constitutes the total of physical and human capital [3]. The most well-known and comprehensive multi-country test of the HOV theorem by Bowen et al. (1987) fails to offer empirical support for the theorem in the case with many factors of production [4]. The choice of the number of factors in the empirical analysis is not straightforward. The inclusion of many factors of production might provide an increased realism of the analysis. However, it also leads to increased difficulties such as errors of measurement and problems in making the empirical definitions of factor intensities and factor endowments. There exist empirical measures of capital intensity and capital endowment that are widely accepted and closely linked to the theoretical concepts that can be used in the two-factor, but not in the multi-factor, case. Furthermore, Hamilton Many colleagues have offered helpful suggestions to an earlier version of this article. In particular, the author wishes to thank Yves Bourdet, David Greenaway, Göte Hansson, Pär Hansson, Rasha Torstensson and Bo Södersten. Financial support from the Bank of Sweden Tercentenary Foundation and the Tore Browaldh Foundation is gratefully acknowledged.

show abstract

Should direct or total factor intensities be used in tests of the factor proportions hypothesis?

Cited by 18 publications

References 3 publications

Global production sharing and trade in the services of factors

Global production sharing and trade in the services of factors

The composition of the human capital stock and its relation to international trade: Evidence from the US and Britain

The factor content of net trade for the OECD countries

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