Nonhomothetic Tastes and Missing Trade of Factor Services
The recent literature on the Heckscher-Ohlin-Vanek (HOV) model has concentrated on the production side, particularly the unrealistic assumptions of identical techniques and factor price equalization. However, less is known about the demand side. In this paper, we study the assumption of identical and homothetic preferences as a cause of the empirical failures in the HOV prediction. While the relaxation in identical production techniques is still crucial to predict the direction of factor trade, nonhomothetic tastes are shown to play an important role in explaining why factor trade is “missing” in the sense of Trefler (1995) relative to the HOV prediction.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 6025, Morgantown, WV 26506-6025|
Phone: (304) 293-7859
Fax: (304) 293-2233
Web page: http://be.wvu.edu/phd_economics/
More information through EDIRC
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.:
- Yong_Seok Choi & Pravin Krishna, 2000.
"The Factor Content of Bilateral Trade:an Empirical Test,"
2000-11, Brown University, Department of Economics.
- Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
- Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-11, December.
- Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
- Keith E. Maskus & Shuichiro Nishioka, 2008.
"Development-Related Biases in Factor Productivities and the HOV Model of Trade,"
CESifo Working Paper Series
2253, CESifo Group Munich.
- Keith E. Maskus & Shuichiro Nishioka, 2009. "Development-related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 519-553, May.
- Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
- Hunter, Linda, 1991. "The contribution of nonhomothetic preferences to trade," Journal of International Economics, Elsevier, vol. 30(3-4), pages 345-358, May.
- Peter K. Schott, 2003.
"One Size Fits All? Heckscher-Ohlin Specialization in Global Production,"
American Economic Review,
American Economic Association, vol. 93(3), pages 686-708, June.
- Peter K. Schott, 2001. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," NBER Working Papers 8244, National Bureau of Economic Research, Inc.
- 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.
- Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
- 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.
- Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
When requesting a correction, please mention this item's handle: RePEc:wvu:wpaper:09-03. 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: (Josh Hall)
If references are entirely missing, you can add them using this form.