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Do factor endowments matter for north-north trade?

  • Donald R. Davis

    ()

    (Columbia University - Department of Economics)

  • David E. Weinstein

    ()

    (Columbia University - Department of Economics)

The dominant paradigm of world trade patterns posits two principal features. Trade between North and South arises due to traditional comparative advantage, largely determined by differences in endowment patterns. Trade within the North, much of it intra-industry trade, is based on economies of scale and product differentiation. The paradigm specifically denies an important role for endowment differences in determining North-North trade. This paper provides the first sound empirical examination of this question. We demonstrate that trade in factor services among countries of the North is systematically related to endowment differences and large in economic magnitude. Intraindustry trade, rather than being a puzzle for a factor endowments theory, is instead the conduit for a great deal of this factor service trade.

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File URL: http://www.econ.columbia.edu/RePEc/pdf/DP0102-03.pdf
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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-03.

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Length: 50 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:clu:wpaper:0102-03
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  1. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January.
  2. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," NBER Working Papers 6785, National Bureau of Economic Research, Inc.
  3. Daniel Trefler & Susan Chun Zhu, 2005. "The Structure of Factor Content Predictions," NBER Working Papers 11221, National Bureau of Economic Research, Inc.
  4. James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
  5. Brecher, Richard A. & Choudhri, Ehsan U., 1982. "The factor content of international trade without factor-price equalization," Journal of International Economics, Elsevier, vol. 12(3-4), pages 277-283, May.
  6. Leamer, E. & Levingsohn, J., 1994. "International Trade Theory: The Evidence," Working Papers 368, Research Seminar in International Economics, University of Michigan.
  7. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
  8. Helpman, E., 1998. "The Structure of Foreign Trade," Papers 18-98, Tel Aviv.
  9. 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.
  10. Maskus, Keith E., 1985. "A test of the Heckscher-Ohlin-Vanek theorem: The Leontief commonplace," Journal of International Economics, Elsevier, vol. 19(3-4), pages 201-212, November.
  11. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, March.
  12. 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.
  13. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  14. Dalia Hakura, 1999. "A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community," IMF Working Papers 99/70, International Monetary Fund.
  15. Repetto, A. & Ventura, J., 1997. "The Leontief-Trefler Hypothesis and Factor Price Insensitivity," Working papers 97-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  16. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  17. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  18. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
  19. Harrigan, James, 1994. "Scale Economies and the Volume of Trade," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 321-28, May.
  20. 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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