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A Century of Missing Trade?

  • Antoni Estevadeordal
  • Alan M. Taylor

In contemporary data, the measured factor content of trade is far smaller than its predicted magnitude in the pure Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. We wonder if this problem has been there from the beginning: that is, we ask if the Heckscher-Ohlin theory was so much at odds with reality at its time of conception. We apply contemporary tests to historical data, focusing on the major trading zone that inspired the factor abundance theory, the Old and New Worlds of the pre-1914 'Greater Atlantic' economy. This places our analysis in a very different context than contemporary studies: an era with lower trade barriers, higher transport costs, a more skewed global distribution of the relevant factors (especially land), and comparably large productivity divergence. These conditions might seem more favorable to the theory, but the results are still very poor.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8301.

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Date of creation: May 2001
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Publication status: published as Estevadeordal, Antoni and Alan M. Taylor. "A Century Of Missing Trade?," American Economic Review, 2002, v92(1,Mar), 383-393.
Handle: RePEc:nbr:nberwo:8301
Note: ITI
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