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A Century of Missing Trade?

Author

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  • Antoni Estevadeordal
  • Alan M. Taylor

Abstract

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.

Suggested Citation

  • Antoni Estevadeordal & Alan M. Taylor, 2001. "A Century of Missing Trade?," NBER Working Papers 8301, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8301
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    References listed on IDEAS

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    1. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    2. Williamson Jeffrey G., 1995. "The Evolution of Global Labor Markets since 1830: Background Evidence and Hypotheses," Explorations in Economic History, Elsevier, vol. 32(2), pages 141-196, April.
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    Citations

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    Cited by:

    1. Oded Galor & Andrew Mountford, 2008. "Trading Population for Productivity: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1143-1179.
    2. Alan M. Taylor, 2002. "Globalization, Trade, and Development: Some Lessons From History," NBER Working Papers 9326, National Bureau of Economic Research, Inc.
    3. Lundmark, Robert, 2010. "European trade in forest products and fuels," Journal of Forest Economics, Elsevier, vol. 16(3), pages 235-251, August.
    4. Oded Galor & Andrew Mountford, 2004. "Trading Population for Productivity," GE, Growth, Math methods 0410001, EconWPA.
    5. Antoni Estevadeordal & Alan M. Taylor, 2002. "Testing Trade Theory in Ohlin's Time," NBER Working Papers 8842, National Bureau of Economic Research, Inc.
    6. Manuel Cabral & Rod Falvey & Chris Milner, 2009. "Does Skill Content Explain Total Trade and Intra-Industry Trade?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 601-619, October.
    7. Daniel Trefler, 2002. "The Case of the Missing Trade and Other Mysteries: Reply," American Economic Review, American Economic Association, vol. 92(1), pages 405-410, March.
    8. Yun-kwong Kwok, 2006. "Global factor trade with differentiated factor prices and factor intensities," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 758-780, August.
    9. Eric O'N. Fisher & Sharon L. May, 2006. "Relativity in Trade Theory: Towards a Solution to the Mystery of Missing Trade," CESifo Working Paper Series 1818, CESifo Group Munich.

    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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