Heckscher-Ohlin: Evidence from Virtual Trade in Value Added

Tadashi Ito, Lorenzo Rotunno and Pierre-Louis Vézina

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Abstract: The fragmentation of production chains across borders has been one of the most distinctive features of globalization since the 1980s. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher–Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries export across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Date: 2017-08
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Published in Review of International Economics, 2017, 25 (3), pp.427 - 446. ⟨10.1111/roie.12230⟩

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Journal Article: Heckscher–Ohlin: Evidence from Virtual Trade in Value Added (2017)
Working Paper: Heckscher-Ohlin: evidence from virtual trade in value added (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01685783

DOI: 10.1111/roie.12230

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