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One Size Fits All? Heckscher-Ohlin Specialization in Global Production

  • Peter K. Schott

This paper introduces a new technique for testing the Heckscher-Ohlin model that allows for the possibility that countries with sufficiently disparate endowments specialize in unique subsets of goods. Results based upon industry-level data reject one-size-fits-all homogeneity in favor of Heckscher-Ohlin specialization. Results also reveal that industry-level data hide substantial intra-industry heterogeneity, violating the assumptions of the model and complicating the interpretation of results from earlier research. A methodology for adjusting industry output to reflect underlying product variation is introduced. Reestimation of the model using adjusted aggregates in place of standard industry classifications provides strong support for Heckscher-Ohlin specialization.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 686-708

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:686-708
Note: DOI: 10.1257/000282803322157043
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