Endowments, Skill-Biased Technology, and Factor Prices: A Unified Approach to Trade

Peter Morrow and Daniel Trefler

No 24078, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a multi-factor, multi-sector Eaton-Kortum model in order to examine the impact of trade costs, factor endowments, and technology (both Ricardian and factor-augmenting) on factor prices, trade in goods, and trade in the services of primary factors (value-added trade). This framework nests the Heckscher-Ohlin-Vanek (HOV) model and the Vanek factor content of trade prediction. We take the model to the data using skilled and unskilled data for 38 countries. We have two findings. First, the key determinants of international variation in the factor content of trade are endowments and international variation in factor inputs used per dollar of output. Input-usage variation in turn is driven by (1) factor-augmenting international technology differences and (2) international factor price differences. Second, our estimates of factor-augmenting international technology differences — which imply cross-country variation in skill-biased technologies — are empirically similar to those used to rationalize cross-country evidence on income differences and directed technical change.

JEL-codes: F1 F11 F14 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-int
Note: ITI
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Citations: View citations in EconPapers (19)

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