Development-related biases in factor productivities and the HOV model of trade
tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment. In this paper, we re-examine this question by estimating factor-specific productivities from the individual technology data of multiple developed and developing countries. We find evidence of factor-augmenting technological differences. Further, the ratios of factor productivities are strongly correlated with corresponding factor endowments. This systematic bias implies that the ability of HOV to explain North-South factor trade depends on both relative factor abundance and factor-augmenting productivity gaps.
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Volume (Year): 42 (2009)
Issue (Month): 2 (May)
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- Keith E. Maskus & Shuichiro Nishioka, 2009.
"Development-related biases in factor productivities and the HOV model of trade,"
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- 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.
- 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.
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