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Explaining Trade Flows: Traditional and New Determinants of Trade Patterns

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Author Info

  • Julien GOURDON

    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

An empirical tradition in international trade seeks to establish whether the predictions of factor abundance theory match with the data. The relation between factor endowments and trade in goods (commodity version of Hecksher-Ohlin) provide mildly encouraging empirical results. But in the analysis of factor service trade and factor endowments (factor content version of HO), the results show that it performs poorly and reject strict HOV models in favor of modifications that allow for technology differences, consumer’s preferences differences, increasing returns to scale or cost of trade. In this paper we test if these “new” determinants help us to improve our estimation of trade patterns in commodities. Since the commodity version allows obtaining a large panel data we also compare two periods, pre and post 1980. We use a Heckman procedure to allow for non linearity in the relation between factors endowments and net exports and between trade intensity and net exports. The results show that adding the “new” determinants of factor content studies help us to improve the prediction of being specialized in the different manufactured products. However specialization according to factor endowments is stronger than ever, especially concerning the specialization according to human capital endowment. Trade patterns are also determined by trade intensity. Here differences in technology, trade policy, transport and transaction costs, explain the difference in trade intensity.

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File URL: http://publi.cerdi.org/ed/2007/2007.06.pdf
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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200706.

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Length: 58
Date of creation: 2007
Date of revision:
Handle: RePEc:cdi:wpaper:893

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Keywords: international trade; Hecksher-Ohlin Model;

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Cited by:
  1. Jan Hanousek & Evžen Kočenda, 2013. "Factors of trade in Europe," Working Papers, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) 333, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  2. Julie Regolo, 2013. "Export Diversification: How Much Does the Choice of the Trading Partner Matter?," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 13072, Institut d'Economie et Econométrie, Université de Genève.
  3. Regolo, Julie, 2013. "Export diversification: How much does the choice of the trading partner matter?," Journal of International Economics, Elsevier, Elsevier, vol. 91(2), pages 329-342.

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