The Role of Factor Content in Trade: Have Changes in Factor Endowments Been Reflected in Trade Patterns and on Relative Wages?
AbstractThe pattern of trade analysed from a factor content perspective reflects the relative factor endowments of the countries examined. Although some large economies, such as the United States, seem to exhibit counter-intuitive behaviour, this is reversed when intermediate trade is taken into account. We argue this is a reflection of the changing nature of production processes and trade. The evidence presented here implies factor endowments are undergoing changes that call for careful analysis of the measures commonly used in trade. Acknowledging the role of intermediate goods to understand a country‘s factor content trade position is one step. Additionally, one must account for the interaction between the domestic determination of employment and wages with international movement of goods and services, and location of tasks.
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Trade Policy Papers with number 109.
Date of creation: Apr 2011
Date of revision:
intermediate inputs; comparative advantage; wages; factor content;
Find related papers by JEL classification:
- F0 - International Economics - - General
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F20 - International Economics - - International Factor Movements and International Business - - - General
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- Susan Stone & Ricardo Cavazos Cepeda, 2011. "Wage Implications of Trade Liberalisation: Evidence for Effective Policy Formation," OECD Trade Policy Papers 122, OECD Publishing.
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