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The Role of Factor Content in Trade: Have Changes in Factor Endowments Been Reflected in Trade Patterns and on Relative Wages?

Author

Listed:
  • Susan Stone

    (OECD)

  • Ricardo Cavazos Cepeda

    (OECD)

  • Anna Jankowska

    (OECD)

Abstract

The pattern of trade analysed from a factor content perspective reflects the relative factor endowments of the countries examined. Although some large economies, such as the United States, seem to exhibit counter-intuitive behaviour, this is reversed when intermediate trade is taken into account. We argue this is a reflection of the changing nature of production processes and trade. The evidence presented here implies factor endowments are undergoing changes that call for careful analysis of the measures commonly used in trade. Acknowledging the role of intermediate goods to understand a country‘s factor content trade position is one step. Additionally, one must account for the interaction between the domestic determination of employment and wages with international movement of goods and services, and location of tasks.

Suggested Citation

  • Susan Stone & Ricardo Cavazos Cepeda & Anna Jankowska, 2011. "The Role of Factor Content in Trade: Have Changes in Factor Endowments Been Reflected in Trade Patterns and on Relative Wages?," OECD Trade Policy Papers 109, OECD Publishing.
  • Handle: RePEc:oec:traaab:109-en
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    File URL: http://dx.doi.org/10.1787/5kgdnq52qxzw-en
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    References listed on IDEAS

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    1. Keiko Ito & Kyoji Fukao, 2005. "The Vertical Division of Labor and Japanese Outward FDI: Impacts on Human Capital Deepening in Japan (in Japanese)," Hi-Stat Discussion Paper Series d05-115, Institute of Economic Research, Hitotsubashi University.
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    Cited by:

    1. Cali,Massimiliano & Francois,Joseph & Hollweg,Claire Honore & Manchin,Miriam & Oberdabernig,Doris Anita & Rojas Romagosa,Hugo Alexander & Rubinova,Stela & Tomberger,Patrick, 2016. "The labor content of exports database," Policy Research Working Paper Series 7615, The World Bank.
    2. Susan Stone & Ricardo Cavazos Cepeda, 2011. "Wage Implications of Trade Liberalisation: Evidence for Effective Policy Formation," OECD Trade Policy Papers 122, OECD Publishing.

    More about this item

    Keywords

    comparative advantage; factor content; intermediate inputs; wages;

    JEL classification:

    • F0 - International Economics - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F20 - International Economics - - International Factor Movements and International Business - - - General

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