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A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community

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  • Dalia Hakura

Abstract

While the Heckscher-Ohlin-Vanek (HOV) theorem has been a dominant paradigm in trade theory, the empirical evidence to support it has been weak. This paper develops a modified HOV model that allows technologies to differ across countries. The revised model significantly improves the theory’s accuracy in predicting trade flows in contrast to the traditional model. The paper also illustrates that, since countries have different technologies, measures of factor contents of trade in final goods using direct and domestically produced indirect input requirements are more accurate and yield more consistent predictions than do traditional measures.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/70.

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Length: 35
Date of creation: 01 May 1999
Date of revision:
Handle: RePEc:imf:imfwpa:99/70

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Cited by:
  1. Donald R. Davis & David E. Weinstein, 2001. "Do Factor Endowments Matter for North-North Trade?," NBER Working Papers 8516, National Bureau of Economic Research, Inc.
  2. Antoni Estevadeordal & Alan M. Taylor, 2001. "A Century of Missing Trade?," NBER Working Papers 8301, National Bureau of Economic Research, Inc.
  3. Elhanan Helpman, 1998. "The Structure of Foreign Trade," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1848, Harvard - Institute of Economic Research.
  4. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, Elsevier, vol. 54(2), pages 361-382, August.
  5. Manuel Cabral & Rod E. Falvey & Chris R. Milner, 2006. "The Skill Content of Inter- and Intra-Industry Trade: Evidence for the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 142(3), pages 546-566, October.
  6. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 145-149, May.
  7. van Berkum, Siemen & van Meijl, Hans, 2000. "The application of trade and growth theories to agriculture: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 44(4), December.
  8. Pieter J.H. van Beukering & Jeroen C.J.M. van den Bergh & Marco A. Janssen & Harmen Verbruggen, 2000. "International Material-Product Chains: An Alternative Perspective on International Trade and Trade Theories," Tinbergen Institute Discussion Papers 00-034/3, Tinbergen Institute.
  9. Alan V Deardorff, 2004. "Local Comparative Advantage: Trade Costs and the Pattern of Trade," Working Papers, Research Seminar in International Economics, University of Michigan 500, Research Seminar in International Economics, University of Michigan.
  10. Ehsan U. Choudhri & Dalia Hakura, 2001. "International Trade in Manufactured Products," IMF Working Papers 01/41, International Monetary Fund.
  11. Elhanan Helpman, 1998. "Explaining the structure of foreign trade: Where do we stand?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 134(4), pages 573-589, December.
  12. Arvind Subramanian & Trevor Serge Coleridge Alleyne, 2001. "What Does South Africa's Pattern of Trade Say About its Labor Markets?," IMF Working Papers 01/148, International Monetary Fund.

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