A test for Heckscher-Ohlin using value-added exports
Philipp Koch () and
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Empirical evidence for the Heckscher-Ohlin model has been inconclusive. We test whether the predictions of the Heckscher-Ohlin Theorem with respect to labor and capital find support in value-added trade. Defining labor-capital intensities and endowments as the ratio of hours worked to the nominal capital stock, we find evidence against Heckscher-Ohlin. However, taking the ratio of total factor compensations, and thus accounting for differences in technologies, we find strong support for it. That is, labor-abundant countries tend to export value-added in goods of labor-intensive industries. Moreover, differentiating between broad industries, we find support for nine out of twelve industries.
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