The Heckscher-Ohlin-Vanek Model of Trade: Why Does It Fail? When Does It Work?
The Heckscher-Ohlin-Vanek model of factor service trade is a central construct in international economics. Empirically, though, it is a flop. This warrants a new approach. Using Japanese regional data we are able to test the HOV model by independently examining its component production and consumption elements. The strict HOV model performs poorly because it cannot explain the international location of production. However, relaxing the assumption of universal factor price equalization yields a dramatic improvement. We also solve most of what Trefler (1995) calls the mystery of the missing trade. In sum, the HOV model performs remarkably well.
|Date of creation:||Jun 1996|
|Date of revision:|
|Publication status:||published as American Economic Review (June 1997).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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.:
- 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.
- 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.
- Dow, James & Werlang, Sérgio Ribeiro da Costa, 1991.
Economics Working Papers (Ensaios Economicos da EPGE)
176, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Courant, P.N. & Deardorff, A.V., 1989.
"International Trade With Lumpy Countries,"
242, Research Seminar in International Economics, University of Michigan.
- Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
- Leamer, E. & Levingsohn, J., 1994.
"International Trade Theory: The Evidence,"
368, Research Seminar in International Economics, University of Michigan.
- Hunter, Linda, 1991. "The contribution of nonhomothetic preferences to trade," Journal of International Economics, Elsevier, vol. 30(3-4), pages 345-358, May.
- 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.
- Paul Krugman, 1990.
"Increasing Returns and Economic Geography,"
NBER Working Papers
3275, National Bureau of Economic Research, Inc.
- Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
- 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.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5625. 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: ()
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.