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Judging Factor Abundance

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  • Bowen, Harry P
  • Sveikauskas, Leo

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. The authors 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. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 107 (1992)
Issue (Month): 2 (May)
Pages: 599-620

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Handle: RePEc:tpr:qjecon:v:107:y:1992:i:2:p:599-620

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Web page: http://mitpress.mit.edu/journals/

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References

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  1. Lawrence F. Katz & Lawrence H. Summers, 1989. "Can Interindustry Wage Differentials Justify Strategic Trade Policy?," NBER Chapters, in: Trade Policies for International Competitiveness, pages 85-124 National Bureau of Economic Research, Inc.
  2. 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.
  3. Crafts, N F R & Thomas, Mark, 1986. "Comparative Advantage in UK Manufacturing Trade, 1910-1935," Economic Journal, Royal Economic Society, vol. 96(383), pages 629-45, September.
  4. Baldwin, Robert E, 1971. "Determinants of the Commodity Structure of U.S. Trade," American Economic Review, American Economic Association, vol. 61(1), pages 126-46, March.
  5. Balassa, Bela, 1979. "The Changing Pattern of Comparative Advantage in Manufactured Goods," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 259-66, May.
  6. Harkness, Jon P, 1978. "Factor Abundance and Comparative Advantage," American Economic Review, American Economic Association, vol. 68(5), pages 784-800, December.
  7. Baldwin, Robert E & Hilton, R Spence, 1984. "A Technique for Indicating Comparative Costs and Predicting Changes in Trade Ratios," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 105-10, February.
  8. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  9. Harkness, Jon P, 1983. "The Factor-Proportions Model with Many Nations, Goods and Factors: Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 298-305, May.
  10. Branson, William H. & Monoyios, Nikolaos, 1977. "Factor inputs in U.S. trade," Journal of International Economics, Elsevier, vol. 7(2), pages 111-131, May.
  11. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  12. Leamer, Edward E & Bowen, Harry P, 1981. "Cross-Section Tests of the Heckscher-Ohlin Theorem: Comment [Factor Abundance and Comparative Advantage]," American Economic Review, American Economic Association, vol. 71(5), pages 1040-43, December.
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Citations

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Cited by:
  1. Beatriz Muriel & Cristina Terra, 2008. "Sources of Comparative Advantages in Brazil," THEMA Working Papers 2008-12, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. 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.
  3. 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.
  4. William K. Hutchinson, 2002. "Explaining United States International Trade, 1870-1910," Vanderbilt University Department of Economics Working Papers 0205, Vanderbilt University Department of Economics.
  5. Vlachos, Jonas & Svaleryd, Helena, 2001. "Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries," Working Paper Series in Economics and Finance 449, Stockholm School of Economics, revised 03 Sep 2001.
  6. Vadym Konchyn, 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.
  7. Ekholm, Karolina, 1995. "Revealed Factor Abundance and the Factor Content of Trade in Headquarter Services," Working Paper Series 440, Research Institute of Industrial Economics.
  8. Arvind Subramanian & Trevor Serge Coleridge Alleyne, 2001. "What Does South Africa's Pattern of Trade Say About its Labor Markets?," IMF Working Papers 01/148, International Monetary Fund.
  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. Shujiro Urata & Kozo Kiyota, 2003. "Services Trade in East Asia," NBER Chapters, in: Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11, pages 379-428 National Bureau of Economic Research, Inc.
  11. 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.
  12. Maryam Asghari, 2011. "Tourism and Natural Resources," Iranian Economic Review, Economics faculty of Tehran university, vol. 16(3), pages 103-117, fall.
  13. 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).

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