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Global factor trade with differentiated factor prices and factor intensities

  • Yun-kwong Kwok

Relaxing the assumption of internationally identical factor intensity techniques in the HOV model creates two challenges. First, computing actual factor intensity techniques of different countries requires detailed input-output tables and factor usage data, which are not always available. Second, determinants of the factor intensity technique differences across countries need to be identified. This paper explores the role of relative factor price differences in the determination of factor intensity technique differences across countries and proposes an inferring method that infers factor intensity techniques of different countries based on relative factor price differences. The HOV model is then modified accordingly.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 39 (2006)
Issue (Month): 3 (August)
Pages: 758-780

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Handle: RePEc:cje:issued:v:39:y:2006:i:3:p:758-780
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  1. Antoni Estevadeordal & Alan M. Taylor, 2001. "A Century of Missing Trade?," NBER Working Papers 8301, National Bureau of Economic Research, Inc.
  2. Davis, D.R. & Weinstein, D.E., 1999. "An Account of Global Factor Trade," Working Papers 435, Research Seminar in International Economics, University of Michigan.
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  4. Helpman, E., 1998. "The Structure of Foreign Trade," Papers 18-98, Tel Aviv.
  5. Harry P. Bowen & Edward E. Leamer & Leo Sveikauskas, 1986. "Multicountry, Multifactor Tests of the Factor Abundance Theory," NBER Working Papers 1918, National Bureau of Economic Research, Inc.
  6. 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.
  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. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June.
  9. 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.
  10. Richard B. Freeman & Remco Oostendorp, 2000. "Wages Around the World: Pay Across Occupations and Countries," NBER Working Papers 8058, National Bureau of Economic Research, Inc.
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