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Judging Factor Abundance

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  • Harry P. Bowen
  • Leo Sveikauskas

Abstract

Recent theory casts doubt on the frequently used interindustry regression method of inferring a country's abundant factors. This paper examines the empirical importance of these theoretical qualifications by comparing regression-derived estimates of factor abundance with both revealed and actual factor abundances for 35 countries and 12 resources. We demonstrate the theoretical importance of trade imbalances for the reliability of the regression estimates and therefore propose and implement a theoretically consistent trade imbalance correction. The results indicate that, despite valid theoretical concerns, the regression estimates are generally reliable indicators of revealed factor abundance. Therefore, the innumerable regression studies conducted over the past 30 years can be considered to provide reliable evidence concerning the validity of the factor abundance theory.

Suggested Citation

  • Harry P. Bowen & Leo Sveikauskas, 1992. "Judging Factor Abundance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 599-620.
    • Handle: RePEc:oup:qjecon:v:107:y:1992:i:2:p:599-620.
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    2. Vlachos, Jonas & Svaleryd, Helena, 2001. "Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries," SSE/EFI Working Paper Series in Economics and Finance 449, Stockholm School of Economics, revised 08 Nov 2001.
    3. Svaleryd, Helena & Vlachos, Jonas, 2002. "Financial Markets, Industrial Specialization and Comparative Advantage - Evidence from OECD Countries," Research Papers in Economics 2002:6, Stockholm University, Department of Economics.
    4. Beatriz Muriel & Cristina Terra, 2009. "Sources of Comparative Advantages in Brazil," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 15-27, February.
    5. Robert E. Baldwin & Fukunari Kimura, 1998. "Measuring U.S. International Goods and Services Transactions," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 9-48, National Bureau of Economic Research, Inc.
    6. Svaleryd, Helena & Vlachos, Jonas, 2005. "Financial markets, the pattern of industrial specialization and comparative advantage: Evidence from OECD countries," European Economic Review, Elsevier, vol. 49(1), pages 113-144, January.
    7. Cörvers, Frank & Reininga, T., 1998. "The Dutch factor content of human and physical capital: a test of the HOV model," ROA Research Memorandum 1E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    8. William K. Hutchinson, 2002. "Explaining United States International Trade, 1870-1910," Vanderbilt University Department of Economics Working Papers 0205, Vanderbilt University Department of Economics.
    9. Corvers, Frank & de Grip, Andries, 1997. "Explaining trade in industrialized countries by country-specific human capital endowments," Economic Modelling, Elsevier, vol. 14(3), pages 395-416, July.
    10. Konchyn, Vadym, 2004. "Komparative Wettbewerbsposition der Ukraine in den Produktions- und Handelsbeziehungen im Weltwirtschaftssystem und mit dem sich erweiternden Europa," Kiel Working Papers 1219, Kiel Institute for the World Economy (IfW Kiel).
    11. Cörvers F. & Reininga T., 1998. "The Dutch Factor Content of Human and Physical Capital: A Test of the HOV Model," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    12. Leon Bettendorf & Kees Folmer & Egbert Jongen, 2013. "The dog that did not bark: The EITC for single mothers in the Netherlands," CPB Discussion Paper 229.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Shujiro Urata & Kozo Kiyota, 2003. "Services Trade in East Asia," NBER Chapters, in: Trade in Services in the Asia-Pacific Region, pages 379-428, National Bureau of Economic Research, Inc.
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