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A Century of Missing Trade?

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  • Antoni Estevadeordal
  • Alan M. Taylor

Abstract

In contemporary data, the measured factor content of trade is far smaller than its predicted magnitude in the pure Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. We wonder if this problem has been there from the beginning: that is, we ask if the Heckscher-Ohlin theory was so much at odds with reality at its time of conception. We apply contemporary tests to historical data, focusing on the major trading zone that inspired the factor abundance theory, the Old and New Worlds of the pre-1914 'Greater Atlantic' economy. This places our analysis in a very different context than contemporary studies: an era with lower trade barriers, higher transport costs, a more skewed global distribution of the relevant factors (especially land), and comparably large productivity divergence. These conditions might seem more favorable to the theory, but the results are still very poor.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8301.

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Date of creation: May 2001
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Publication status: published as Estevadeordal, Antoni and Alan M. Taylor. "A Century Of Missing Trade?," American Economic Review, 2002, v92(1,Mar), 383-393.
Handle: RePEc:nbr:nberwo:8301

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  1. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
  2. Gordon H. Hanson & Robert C. Feenstra, 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.
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  7. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  8. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, October.
  9. O'Rourke, Kevin H & Taylor, Alan M & Williamson, Jeffrey G, 1996. "Factor Price Convergence in the Late Nineteenth Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 499-530, August.
  10. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, December.
  11. 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.
  12. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
  13. Jeffrey G. Williamson, 1992. "The Evolution of Global Labor Markets Since 1830 Background Evidence and Hypotheses," NBER Historical Working Papers 0036, National Bureau of Economic Research, Inc.
  14. Clark, Gregory, 1987. "Why Isn't the Whole World Developed? Lessons from the Cotton Mills," The Journal of Economic History, Cambridge University Press, vol. 47(01), pages 141-173, March.
  15. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, vol. 90(2), pages 145-149, May.
  16. Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
  17. repec:fth:michin:435 is not listed on IDEAS
  18. O'Rourke, Kevin & Williamson, Jeffrey G., 1994. "Late Nineteenth-Century Anglo-American Factor-Price Convergence: Were Heckscher and Ohlin Right?," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 892-916, December.
  19. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
  20. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
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Cited by:
  1. Yun-kwong Kwok, 2006. "Global factor trade with differentiated factor prices and factor intensities," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 758-780, August.
  2. Eric O'N. Fisher & Sharon L. May, 2006. "Relativity in Trade Theory: Towards a Solution to the Mystery of Missing Trade," CESifo Working Paper Series 1818, CESifo Group Munich.
  3. Alan M. Taylor, 2002. "Globalization, Trade, and Development: Some Lessons From History," NBER Working Papers 9326, National Bureau of Economic Research, Inc.
  4. Lundmark, Robert, 2010. "European trade in forest products and fuels," Journal of Forest Economics, Elsevier, vol. 16(3), pages 235-251, August.
  5. Antoni Estevadeordal & Alan M. Taylor, 2002. "Testing Trade Theory in Ohlin's Time," NBER Working Papers 8842, National Bureau of Economic Research, Inc.
  6. Oded Galor & Andrew Mountford, 2008. "Trading Population for Productivity: Theory and Evidence," Working Papers 2008-2, Brown University, Department of Economics.
  7. Oded Galor & Andrew Mountford, 2004. "Trading Population for Productivity," GE, Growth, Math methods 0410001, EconWPA.
  8. Daniel Trefler, 2002. "The Case of the Missing Trade and Other Mysteries: Reply," American Economic Review, American Economic Association, vol. 92(1), pages 405-410, March.

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