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The factor content of Chinese trade

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  • Kathryn G. Marshall

Abstract

This article demonstrates that the growth of China's exports in recent years is consistent with the Heckscher--Ohlin--Vanek (HOV) prediction of the factor content of trade based on international differences in factor endowments, after adjusting for substantial differences in factor-specific productivity. A comparison of the Organisation for Economic Co-Operation and Development input--output data in the year 2000 shows that China's labor productivity relative to the United States is the lowest in a sample of 33 diverse countries, although China's capital is more productive than US capital. This in turn demonstrates the importance of a factor-specific rather than factor-neutral productivity adjustment common in much of the HOV literature. The use of value-added data to measure factor usage helps to correct for unobserved differences in factor qualities and differences in productivity across sectors, as is demonstrated for China. China's low average labor productivity reflects the structure of the Chinese economy where most employment is still in the inefficient agriculture and service sectors, with only 11% of employment in the more modern export-oriented manufacturing sector. Due to a trade surplus, China exports both labor and capital but Leamer's ( The Journal of Political Economy 1980;88: 495--503) test for trade-revealed factor abundance confirms that China is labor abundant even after substantial factor-specific productivity adjustments.

Suggested Citation

  • Kathryn G. Marshall, 2011. "The factor content of Chinese trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(6), pages 769-787, September.
  • Handle: RePEc:taf:jitecd:v:20:y:2011:i:6:p:769-787
    DOI: 10.1080/09638190903318194
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    References listed on IDEAS

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    1. Robert E. Baldwin, 2008. "The Development and Testing of Heckscher-Ohlin Trade Models: A Review," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026562, January.
    2. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, January.
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    Cited by:

    1. Egger, Peter & Marshall, Kathryn G. & Fisher, Eric O'N., 2011. "Empirical foundations for the resurrection of Heckscher-Ohlin theory," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 146-156, April.
    2. Wang, Hongbo & Rickman, Dan S., 2017. "Housing Price and Population Growth across China: The Role of Housing Supply," MPRA Paper 79641, University Library of Munich, Germany.

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