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Relativity in Trade Theory: Towards a Solution to the Mystery of Missing Trade

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Author Info
Eric O'N. Fisher ()
Sharon L. May ()

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Abstract

Using OECD input output matrices consistently, we offer a tentative solution to the mystery of missing trade. First, we confirm the usual rejection of factor price equalization and identical technologies. Second, we develop a new technique to compute the factor content of trade when countries’ technologies are different. Measuring factor content conventionally, we find a putative paucity of trade in these data. When factor content is measured correctly, theory predicts the direction and volume of trade more accurately. Thus measuring the factor content of trade according to the country of origin may vindicate the Heckscher-Ohlin-Vanek paradigm.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1818.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1818

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Find related papers by JEL classification:
C67 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Input-Output Models
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
F10 - International Economics - - Trade - - - General

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  1. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August. [Downloadable!] (restricted)
  2. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  3. Alan Krueger, 1999. "Measuring Labor's Share," Working Papers 792, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
    Other versions:
  4. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June. [Downloadable!] (restricted)
  5. Antoni Estevadeordal & Alan M. Taylor, 2002. "A Century of Missing Trade?," American Economic Review, American Economic Association, vol. 92(1), pages 383-393, March. [Downloadable!]
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  6. Robert C. Feenstra & Gordon H. Hanson, 2000. "Aggregation Bias in the Factor Content of Trade: Evidence from U.S. Manufacturing," American Economic Review, American Economic Association, vol. 90(2), pages 155-160, May. [Downloadable!] (restricted)
  7. Harkness, Jon P, 1978. "Factor Abundance and Comparative Advantage," American Economic Review, American Economic Association, vol. 68(5), pages 784-800, December. [Downloadable!] (restricted)
  8. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April. [Downloadable!] (restricted)
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  9. Daniele Checchi & Cecilia García Peñalosa, 2005. "Labour Market Institutions and the Personal Distribution of Income in the OECD," UNIMI - Research Papers in Economics, Business, and Statistics 1009, Universitá degli Studi di Milano. [Downloadable!]
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  10. Patrick J. Conway, 2002. "The Case of the Missing Trade and Other Mysteries: Comment," American Economic Review, American Economic Association, vol. 92(1), pages 394-404, March. [Downloadable!]
  11. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December. [Downloadable!] (restricted)
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  12. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
  13. repec:fth:prinin:413 is not listed on IDEAS
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