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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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Handle: RePEc:nbr:nberwo:8301

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  1. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
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Citations

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Cited by:
  1. Oded Galor & Andrew Mountford, 2008. "Trading Population for Productivity: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1143-1179.
  2. Lundmark, Robert, 2010. "European trade in forest products and fuels," Journal of Forest Economics, Elsevier, vol. 16(3), pages 235-251, August.
  3. 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.
  4. Antoni Estevadeordal & Alan M. Taylor, 2002. "Testing Trade Theory in Ohlin's Time," NBER Working Papers 8842, National Bureau of Economic Research, Inc.
  5. 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.
  6. Alan M. Taylor, 2002. "Globalization, Trade, and Development: Some Lessons From History," NBER Working Papers 9326, National Bureau of Economic Research, Inc.
  7. Oded_Galor & Andrew Mountford, 2004. "Trading Population for Productivity," Working Papers 2004-16, Brown University, Department of Economics.
  8. 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.

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