Multiple cones, factor price differences and the factor content of trade
This paper examines the theoretical predictions of the multi-cone Heckscher-Ohlin model and the empirical evidence for it. I extend Helpman (1984)by identifying additional restrictions that characterize the free trade equilibrium. I illustrate that the complete set of restrictions are the building blocks of a multi-cone factor content specification which is the factor content dual to Alan Deardorff's (1979)well-known chain of comparative advantage goods prediction. The theoretical analysis implies that the existing tests of Helpman are incomplete. Applying the complete set of restrictions to Choi and Krishna's data set of 8 OECD countries, I find limited empirical support. This is compatible with previous studies suggesting that OECD countries do not occupy different cones.
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- 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.
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"The Factor Content of Bilateral Trade:an Empirical Test,"
2000-11, Brown University, Department of Economics.
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- Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
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