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Heckscher-Ohlin: evidence from virtual trade in value added

Lorenzo Rotunno (), Pierre-Louis Vézina () and Ito Tadashi

No 549, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. 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 exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Keywords: International trade; International economic relations; Econometric model; International division of labor; Heckscher-Ohlin; Value added; Trade theory; Global value chains (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2015-12-01
New Economics Papers: this item is included in nep-int
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 549. 2015-12-01

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Journal Article: Heckscher–Ohlin: Evidence from Virtual Trade in Value Added (2017) Downloads
Working Paper: Heckscher-Ohlin: Evidence from Virtual Trade in Value Added (2017)
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