The Heckscher–Ohlin model and the network structure of international trade

Abstract

This paper estimates for 28 product groups a characteristic parameter that reflects the topological structure of its trading network. Using these estimates, it then describes how the structure of international trade has evolved during during the 1980-2000 period. Thereafter, it demonstrates the importance of networks in international trade by explicitly accounting for their scaling properties when testing the prediction of the Heckscher-Ohlin model that factor endowment differentials determine bilateral trade flows. The results suggest that differences in factor endowments increase bilateral trade in goods that are traded in "dispersed" networks. For goods that are traded in "concentrated" networks, factor endowment differentials are less important.

Determinants of the exports of Hungary: Trade theory and the gravity model

“…In contrast, Rahman (2003) analyzed foreign trade of Bangladesh for the period of 1972-1999 and got positive coefficients for the variable capturing the per capita differential between the two countries; and thus foreign trade of Bangladesh corresponds to the H-O model. Baskaran et al (2011) augmented the gravity equation by adding the absolute difference of capital-labor ratio of country i and j from Penn World Table, and analyzed the trading system as a scale-free network for 28 product groups for the period of 1980-2000. They found negative coefficients for the factor endowment variables rejecting the H-O model, however augmenting the model with the interaction between the factor differential and the network variable resulted in much more favorable coefficients with regard to the H-O model.…”

Vertex centralities in input-output networks reveal the structure of modern economies

“…Several authors have studied international trade networks. The early work used binary approaches [8,9], but it soon became evident that trade ought to be analyzed as weighted graph [10][11][12]. Interpreting the gross domestic product (GDP) as a country's fitness, Garlaschelli and Loffredo [13] proposed a model reproducing the topology of bilateral trade.…”

The international trade pattern of Lithuanian metalworking sector

“…It states that country will produce and export goods which make intensive use of factors (for example, land, labor, capital) that are locally abundant and import goods which make intensive use of factors that are locally scarce. However, both anecdotal evidence and empirical tests tend to reject the validity of this theory (Baskaran et al 2011). There are reasons to think that the multiple-cone Heckscher-Ohlin (HO) model may be more relevant and plausible for the real world (Suzuki, Doi 2015;Zhang 2015).…”