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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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  1. Doireann Fitzgerald & Juan Carlos Hallak, 2004. "Specialization, Factor Accumulation and Development," NBER Working Papers 10638, National Bureau of Economic Research, Inc.
  2. Keith E. Maskus & Shuichiro Nishioka, 2009. "Development-related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 519-553, May.
  3. 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.
  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. 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.
  6. 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.
  7. 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.
  8. 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.
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