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Development-related biases in factor productivities and the HOV model of trade

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  • Keith E. Maskus
  • Shuichiro Nishioka

Abstract

tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment. In this paper, we re-examine this question by estimating factor-specific productivities from the individual technology data of multiple developed and developing countries. We find evidence of factor-augmenting technological differences. Further, the ratios of factor productivities are strongly correlated with corresponding factor endowments. This systematic bias implies that the ability of HOV to explain North-South factor trade depends on both relative factor abundance and factor-augmenting productivity gaps.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 42 (2009)
Issue (Month): 2 (May)
Pages: 519-553

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Handle: RePEc:cje:issued:v:42:y:2009:i:2:p:519-553

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References

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  1. Doireann Fitzgerald & Juan Carlos Hallak, 2002. "Specialization, Factor Accumulation and Development," Working Papers 488, Research Seminar in International Economics, University of Michigan.
  2. Lai, Huiwen & Zhu, Susan Chun, 2007. "Technology, endowments, and the factor content of bilateral trade," Journal of International Economics, Elsevier, vol. 71(2), pages 389-409, April.
  3. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
  4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  5. Keith E. Maskus & Shuichiro Nishioka, 2008. "Development-Related Biases in Factor Productivities and the HOV Model of Trade," CESifo Working Paper Series 2253, CESifo Group Munich.
  6. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
  7. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June.
  8. Gordon H. Hanson & Robert C. Feenstra, 2000. "Aggregation Bias in the Factor Content of Trade: Evidence from U.S. Manufacturing," American Economic Review, American Economic Association, vol. 90(2), pages 155-160, May.
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Citations

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Cited by:
  1. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage: A Quantitative Approach," Working Papers 13-2008, Singapore Management University, School of Economics.
  2. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
  3. Keith E. Maskus & Shuichiro Nishioka, 2008. "Development-Related Biases in Factor Productivities and the HOV Model of Trade," CESifo Working Paper Series 2253, CESifo Group Munich.
  4. Shuichiro Nishioka, 2009. "Reconsidering the Role of Capital Accumulation for International Specialization across Industries," Working Papers 09-13, Department of Economics, West Virginia University.
  5. Fadinger, Harald, 2008. "Productivity Differences in an Interdependent World," MPRA Paper 7603, University Library of Munich, Germany.
  6. Fisher, Eric O'N., 2011. "Heckscher-Ohlin theory when countries have different technologies," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 202-210, April.
  7. Artal-Tur, Andrés & Castillo-Giménez, Juana & Llano-Verduras, Carlos & Requena-Silvente, Francisco, 2011. "The factor content of regional bilateral trade: The role of technology and demand," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 157-172, April.
  8. Nishioka, Shuichiro, 2012. "International differences in production techniques: Implications for the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 98-104.
  9. Marshall, Kathryn G., 2012. "International productivity and factor price comparisons," Journal of International Economics, Elsevier, vol. 87(2), pages 386-390.
  10. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, vol. 82(2), pages 238-248, November.
  11. Puzzello, Laura, 2012. "A proportionality assumption and measurement biases in the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 105-111.
  12. Stratford Douglas & Shuichiro Nishioka, 2009. "International Differences in Emissions Intensity and Emissions Content of Global Trade," Working Papers 09-02, Department of Economics, West Virginia University.
  13. Kris James Mitchener & Se Yan, 2010. "Globalization, Trade & Wages: What Does History tell us about China?," NBER Working Papers 15679, National Bureau of Economic Research, Inc.
  14. James Cassing & Shuichiro Nishioka, 2009. "Nonhomothetic Tastes and Missing Trade of Factor Services," Working Papers 09-03, Department of Economics, West Virginia University.
  15. Nishioka, Shuichiro, 2013. "R&D, trade in intermediate inputs, and the comparative advantage of advanced countries," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 96-110.

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