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Heckscher-Ohlin : evidence from virtual trade in value added

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  • Rotunno, Lorenzo
  • Vezina, Pierre-Louis
  • Ito, Tadashi

Abstract

The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher-Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Suggested Citation

  • Rotunno, Lorenzo & Vezina, Pierre-Louis & Ito, Tadashi, 2015. "Heckscher-Ohlin : evidence from virtual trade in value added," IDE Discussion Papers 549, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper549
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    Cited by:

    1. Reshef, Ariell & Santoni, Gianluca, 2023. "Are your labor shares set in Beijing? The view through the lens of global value chains," European Economic Review, Elsevier, vol. 155(C).
    2. Kazunobu Hayakawa & Hiroshi Mukunoki, 2023. "The magnification effect in global value chains," Review of International Economics, Wiley Blackwell, vol. 31(1), pages 141-157, February.
    3. Stöllinger, Roman & Guarascio, Dario, 2023. "Comparative advantages in the digital era–A Heckscher-Ohlin-Vanek approach," International Economics, Elsevier, vol. 175(C), pages 63-89.
    4. Antrà s, Pol & Chor, Davin, 2021. "Global Value Chains," CEPR Discussion Papers 15908, C.E.P.R. Discussion Papers.
    5. Kozo Kiyota, 2021. "The Leontief Paradox Redux," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 296-313, May.
    6. Tadashi Ito, 2020. "Production Networks and “The Great Convergence”," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 16(1), pages 73-94, February.
    7. Antonia Reinecke & Hans-Jörg Schmerer, 2017. "Government efficiency and exports in China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 15(3), pages 249-268, July.
    8. Sasahara, Akira, 2019. "Explaining the employment effect of exports: Value-added content matters," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 1-21.
    9. Philipp Koch & Clemens Fessler, 2020. "A test for Heckscher-Ohlin using value-added exports," Papers 2009.11743, arXiv.org.

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    More about this item

    Keywords

    International trade; International economic relations; Econometric model; International division of labor; Heckscher-Ohlin; Value added; Trade theory; Global value chains;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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