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A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community

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  • Dalia S Hakura

Abstract

While the Heckscher-Ohlin-Vanek (HOV) theorem has been a dominant paradigm in trade theory, the empirical evidence to support it has been weak. This paper develops a modified HOV model that allows technologies to differ across countries. The revised model significantly improves the theory’s accuracy in predicting trade flows in contrast to the traditional model. The paper also illustrates that, since countries have different technologies, measures of factor contents of trade in final goods using direct and domestically produced indirect input requirements are more accurate and yield more consistent predictions than do traditional measures.

Suggested Citation

  • Dalia S 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.
  • Handle: RePEc:imf:imfwpa:99/70
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    Cited by:

    1. Alan V. Deardorff, 2014. "Local comparative advantage: Trade costs and the pattern of trade," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(1), pages 9-35, March.
    2. Donald R. Davis & David E. Weinstein, 2001. "Do Factor Endowments Matter for North-North Trade?," NBER Working Papers 8516, National Bureau of Economic Research, Inc.
    3. Antoni Estevadeordal & Alan M. Taylor, 2002. "A Century of Missing Trade?," American Economic Review, American Economic Association, vol. 92(1), pages 383-393, March.
    4. Ehsan U. Choudhri & Dalia S Hakura, 2001. "International Trade in Manufactured Products; A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition," IMF Working Papers 01/41, International Monetary Fund.
    5. Manuel Cabral & Rod E. Falvey & Chris R. Milner, 2006. "The Skill Content of Inter- and Intra-Industry Trade: Evidence for the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 546-566, October.
    6. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    7. Arvind Subramanian & Trevor Serge Coleridge Alleyne, 2001. "What Does South Africa's Pattern of Trade Say About its Labor Markets?," IMF Working Papers 01/148, International Monetary Fund.
    8. Zeddies, Götz, 2011. "Factor Content of Intra-European Trade Flows," IWH Discussion Papers 6/2011, Halle Institute for Economic Research (IWH).
    9. Elhanan Helpman, 1998. "Explaining the structure of foreign trade: Where do we stand?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 573-589, December.
    10. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, vol. 90(2), pages 145-149, May.
    11. 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.
    12. Omer GOKCEKUS & Kevin BENGYAK, 2015. "Learning Heckscher-Ohlin Model in Five Easy Steps," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 137-143, March.
    13. van Berkum, Siemen & van Meijl, Hans, 2000. "The application of trade and growth theories to agriculture: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(4), December.

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