Development-Related Biases in Factor Productivities and the HOV Model of Trade
Past empirical failures of the basic Heckscher-Ohlin-Vanek (HOV) model related to the inability of data to meet its restrictive assumptions, particularly identical international technologies and factor price equalization. Trefler (1993) tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment, an approach that was heavily criticized. In this paper, we re-examine the productivity question by estimating factor-specific productivities from the individual technology data of multiple countries. Using a dataset of 29 countries, both developed and developing, we find evidence of factor-augmenting technological differences. In particular, the factor-productivity adjustment works well for developed members of the OECD. Further, we find that 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 both on relative factor abundance and factor-augmenting productivity gaps.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Keith E. Maskus & Shuichiro Nishioka, 2009.
"Development-related biases in factor productivities and the HOV model of trade,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 42(2), pages 519-553, May.
- Keith E. Maskus & Shuichiro Nishioka, 2008. "Development-Related Biases in Factor Productivities and the HOV Model of Trade," CESifo Working Paper Series 2253, CESifo Group Munich.
- Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
- Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
- 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 421-446, June.
- Fitzgerald, Doireann & Hallak, Juan Carlos, 2004. "Specialization, factor accumulation and development," Journal of International Economics, Elsevier, vol. 64(2), pages 277-302, December.
- Doireann Fitzgerald & Juan Carlos Hallak, 2002. "Specialization, Factor Accumulation and Development," Working Papers 488, Research Seminar in International Economics, University of Michigan.
- Doireann Fitzgerald & Juan Carlos Hallak, 2004. "Specialization, Factor Accumulation and Development," NBER Working Papers 10638, National Bureau of Economic Research, Inc.
- Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
- Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
- 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.
- 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.
- 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.
- Lai, Huiwen & Zhu, Susan Chun, 2007. "Technology, endowments, and the factor content of bilateral trade," Journal of International Economics, Elsevier, vol. 71(2), pages 389-409, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2253. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.