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A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community

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  • Ms. Dalia S Hakura

Abstract

While the Heckscher-Ohlin-Vanek (HOV) theorem has been a dominant paradigm in trade theory, the empirical evidence to support it has been weak. This paper develops a modified HOV model that allows technologies to differ across countries. The revised model significantly improves the theory’s accuracy in predicting trade flows in contrast to the traditional model. The paper also illustrates that, since countries have different technologies, measures of factor contents of trade in final goods using direct and domestically produced indirect input requirements are more accurate and yield more consistent predictions than do traditional measures.

Suggested Citation

  • Ms. Dalia S Hakura, 1999. "A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community," IMF Working Papers 1999/070, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/070
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    Citations

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    Cited by:

    1. Ehsan U. Choudhri & Ms. Dalia S Hakura, 2001. "International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition," IMF Working Papers 2001/041, International Monetary Fund.
    2. Antoni Estevadeordal & Alan M. Taylor, 2002. "A Century of Missing Trade?," American Economic Review, American Economic Association, vol. 92(1), pages 383-393, March.
    3. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    4. van Berkum, Siemen & van Meijl, Hans, 2000. "The application of trade and growth theories to agriculture: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(4), pages 1-38.
    5. Alan V. Deardorff, 2014. "Local comparative advantage: Trade costs and the pattern of trade," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(1), pages 9-35, March.
    6. Christina Paraskevopoulou & Persefoni Tsaliki & Lefteris Tsoulfidis, 2016. "Revisiting Leontief’s paradox," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 693-713, November.
    7. Idrisova, Vittoria (Идрисова, Виттория), 2017. "Determinants of Value-Added Exports: The Role of Import Demand Factors [Детерминанты Экспорта Добавленной Стоимости: Роль Факторов Спроса На Импорт]," Working Papers 051715, Russian Presidential Academy of National Economy and Public Administration.
    8. Zeddies, Götz, 2011. "Factor Content of Intra-European Trade Flows," IWH Discussion Papers 6/2011, Halle Institute for Economic Research (IWH).
    9. Elhanan Helpman, 1998. "Explaining the structure of foreign trade: Where do we stand?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 573-589, December.
    10. Pieter J.H. van Beukering & Jeroen C.J.M. van den Bergh & Marco A. Janssen & Harmen Verbruggen, 2000. "International Material-Product Chains: An Alternative Perspective on International Trade and Trade Theories," Tinbergen Institute Discussion Papers 00-034/3, Tinbergen Institute.
    11. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," Thesis Commons bmxag, Center for Open Science.
    12. Donald R. Davis & David E. Weinstein, 2001. "Do Factor Endowments Matter for North-North Trade?," NBER Working Papers 8516, National Bureau of Economic Research, Inc.
    13. Manuel Cabral & Rod E. Falvey & Chris R. Milner, 2006. "The Skill Content of Inter- and Intra-Industry Trade: Evidence for the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 546-566, October.
    14. Mr. Arvind Subramanian & Mr. Trevor Serge Coleridge Alleyne, 2001. "What Does South Africa's Pattern of Trade Say About its Labor Markets?," IMF Working Papers 2001/148, International Monetary Fund.
    15. Susan Chun Zhu & Daniel Trefler, 2000. "Beyond the Algebra of Explanation: HOV for the Technology Age," American Economic Review, American Economic Association, vol. 90(2), pages 145-149, May.
    16. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
    17. Omer GOKCEKUS & Kevin BENGYAK, 2015. "Learning Heckscher-Ohlin Model in Five Easy Steps," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 137-143, March.

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