Explaining Trade Flows: Traditional and New Determinants of Trade Patterns
AbstractAn 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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Bibliographic InfoPaper provided by CERDI in its series Working Papers with number 200706.
Date of creation: 2007
Date of revision:
international trade; Hecksher-Ohlin Model;
Other versions of this item:
- Gourdon, Julien, 2009. "Explaining Trade Flows: Traditional and New Determinants of Trade Patterns," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 53-86.
- Gourdon, Julien, 2006. "Explaining Trade Flows: Traditional and New Determinants of Trade Patterns," MPRA Paper 4175, University Library of Munich, Germany.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F20 - International Economics - - International Factor Movements and International Business - - - General
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- Julie Regolo, 2013. "Export Diversification: How Much Does the Choice of the Trading Partner Matter?," Research Papers by the Department of Economics, University of Geneva 13072, Département des Sciences Économiques, Université de Genève.
- Jan Hanousek & Evžen Kočenda, 2013. "Factors of trade in Europe," Working Papers 333, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
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