"Endowments Do Matter" Relative Factor Abundance and Trade

P. Debaere

Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: A test of the Heckscher-Ohlin-Vanek [HOV] hypothesis for the cases when factor price equalization does not hold is developed. For all the possible country pairs of the BLS (1987) and Trefler (1995) data set, I test whether trade reveals the relative factor abundance of one country compared to another. For the factor pairs capital-labor, labor-land and land-capital, I investigate whether the higher endowment ratio of one country compared to another is reflected in their multilateral trade. A strength of the method is that technology differences, measurement error or home bias are allowed for, but do not have to be estimated. For the hundreds of country pairs, the relative abundance of two countries is revealed in trade in about 75 percent of the cases. In other words, endowments do matter.

Keywords: INTERNATIONAL; TRADE (search for similar items in EconPapers)
JEL-codes: F10 F11 (search for similar items in EconPapers)
Pages: 54 pages
Date: 1998
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:429

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