IDEAS home Printed from https://ideas.repec.org/a/rfe/zbefri/v33y2015i1p103-124.html

Empirical evidence on Heckscher-Ohlin trade theorem: the case of international trade between Croatia and the rest of the European Union member states

Author

Listed:
  • Vlatka Bilas

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

  • Mile Bosnjak

    (SKDD – CCP Smart Clear Ltd, Zagreb, Croatia)

Abstract

The goal of this research is to test the Heckscher-Ohlin theorem of comparative advantages on the sample of the Republic of Croatia and other European Union member countries. Heckscher-Ohlin theorem of comparative advantages can largely explain international trade in cases where the sample of countries is heterogeneous, in terms of the achieved level of development and the production factors abundance. In regards to aforementioned research hypothesis was tested using several regression models. Based on the research results, it can be concluded that the international merchandise trade between Croatia and other European Union (EU) members is in accordance with the assumed by Heckscher-Ohlin comparative advantages theory. The difference in production factors abundance between Croatia and other European Union members better explains differences in production factor unit prices than net merchandise trade. Empirical testing show that merchandise trade between Croatia and other European Union members is correlated with the capital abundance. We found no significant correlation between merchandise trade and relative education level of Croatian labor force in regards to other EU countries. Furthermore, based on the empirical testing, it can be concluded that Croatia in regards to EU27 average, is a labor abundant country and net exports of Croatian manufacturing is labor intensive. Estimated results point out the production factor importance as a base for further merchandise exports development and economic development as a whole. Finally, basic conclusion is that Croatia needs to put more effort on investment attraction and therefore capital to labor ratio increase.

Suggested Citation

  • Vlatka Bilas & Mile Bosnjak, 2015. "Empirical evidence on Heckscher-Ohlin trade theorem: the case of international trade between Croatia and the rest of the European Union member states," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 33(1), pages 103-124.
    • Handle: RePEc:rfe:zbefri:v:33:y:2015:i:1:p:103-124
    as

    Download full text from publisher

    File URL: https://www.efri.uniri.hr/sites/efri.uniri.hr/files/cr-collections/2/03-bilas-bosnjak-2015-1-1434618273.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pavel Ciaian & d'Artis Kancs & Jan Pokrivcak, 2008. "Comparative Advantages, Transaction Costs and Factor Content of Agricultural Trade: Empirical Evidence from the CEE," EERI Research Paper Series EERI_RP_2008_03, Economics and Econometrics Research Institute (EERI), Brussels.
    2. Noland, Marcus, 1997. "Has Asian export performance been unique?," Journal of International Economics, Elsevier, vol. 43(1-2), pages 79-101, August.
    3. Dermot J. Hayes & Frank H. Fuller, 1999. "Optimal Chinese Agricultural Trade Patterns under the Laws of Comparative Advantage," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 99-wp233, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Daron Acemoglu & Fabrizio Zilibotti, 2001. "Productivity Differences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 563-606.
    5. Archana, Srivastava, 2012. "Heckscher Ohlin Vanek Theorem: an excess supply approach," MPRA Paper 38279, University Library of Munich, Germany.
    6. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
    7. O'Rourke, Kevin, 2003. "Heckscher-Ohlin Theory and Individual Attitudes Towards Globalization," CEPR Discussion Papers 4018, C.E.P.R. Discussion Papers.
    8. Artal-Tur, Andrés & Castillo-Giménez, Juana & Llano-Verduras, Carlos & Requena-Silvente, Francisco, 2011. "The factor content of regional bilateral trade: The role of technology and demand," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 157-172, April.
    9. Pavel Ciaian & d'Artis Kancs & Jan Pokrivcak, 2011. "Comparative Advantages, Transaction Costs and Factor Content in Agricultural Trade: Empirical Evidence from the CEE - Vantaggi comparati, costi di transazione e contenuto dei fattori nel commercio agr," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(1), pages 67-101.
    10. Peter K. Schott, 2001. "Do Rich and Poor Countries Specialize in a Different Mix of Goods? Evidence from Product-Level US Trade Data," NBER Working Papers 8492, National Bureau of Economic Research, Inc.
    11. David B. Audretsch, 2018. "Industrial Organization and the Organization of Industries: Linking Industry Structure to Economic Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(4), pages 603-620, June.
    12. Harrigan, James, 1995. "Factor endowments and the international location of production: Econometric evidence for the OECD, 1970-1985," Journal of International Economics, Elsevier, vol. 39(1-2), pages 123-141, August.
    13. repec:osf:thesis:bmxag_v1 is not listed on IDEAS
    14. Avik Chakrabarti, 2005. "The Heckscher-Ohlin-Vanek Theorem and International Factor Price Differences," Open Economies Review, Springer, vol. 16(4), pages 407-412, October.
    15. Sayan Serdar, 2003. "H-O for H2O: Can the Heckscher-Ohlin Framework Explain the Role of Free Trade in Distributing Scarce Water Resources Around the Middle East?," Review of Middle East Economics and Finance, De Gruyter, vol. 1(3), pages 21-36, December.
    16. Arnade, Carlos Anthony, 1994. "Testing two trade models in Latin American agriculture," Agricultural Economics, Blackwell, vol. 10(1), pages 49-59, January.
    17. Assaf Zimring, 2019. "Testing the Heckscher–Ohlin–Vanek theory with a natural experiment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(1), pages 58-92, February.
    18. Hrvoje Jošic, Berislav Žmuk, 2023. "There is still life in factor proportions model: an evidence from the selected OECD countries," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 20(2), pages 193-221, December.
    19. George Sorg-Langhans & Clemens C. Struck & Adnan Velic, 2018. "Solving Leontief's Paradox with Endogenous Growth Theory," Working Papers 201819p, School of Economics, University College Dublin.
    20. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    21. Yilmazkuday, Hakan, 2009. "Distribution of Consumption, Production and Trade within the U.S," MPRA Paper 16361, University Library of Munich, Germany.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rfe:zbefri:v:33:y:2015:i:1:p:103-124. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Danijela Ujcic (email available below). General contact details of provider: https://edirc.repec.org/data/efrijhr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.