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International Factor Price Differences: Leontief Was Right!

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  • Trefler, Daniel

Abstract

The factor price equalization hypothesis is widely at odds with the large variation in factor prices across countries. similarly, the Heckscher-Ohlin-Vanek theorem constitutes an incomplete description of trade in factor services: its predictions are always rejected empirically. These two issues are examined using a modification of the Heckscher-Ohlin-Vanek model that allows for factor-augmenting international productivity differences. The empirical results are stark: this simple modification of the Heckscher-Ohlin-Vanek theorem explains much of the factor content of trade and the cross-country variation in factor prices. Copyright 1993 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 101 (1993)
Issue (Month): 6 (December)
Pages: 961-87

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Handle: RePEc:ucp:jpolec:v:101:y:1993:i:6:p:961-87

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Web page: http://www.journals.uchicago.edu/JPE/

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