The dominant paradigm of world trade patterns posits two principal features. Trade between North and South arises due to traditional comparative advantage, largely determined by differences in endowment patterns. Trade within the North, much of it intra-industry trade, is based on economies of scale and product differentiation. The paradigm specifically denies an important role for endowment differences in determining North-North trade. This paper provides the first sound empirical examination of this question. We demonstrate that trade in factor services among countries of the North is systematically related to endowment differences and large in economic magnitude. Intraindustry trade, rather than being a puzzle for a factor endowments theory, is instead the conduit for a great deal of this factor service trade.
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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number
0102-03.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Donald R. Davis & David E. Weinstein, 2001.
"The Factor Content of Trade,"
NBER Working Papers
8637, National Bureau of Economic Research, Inc.
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