Multi-country, Multifactor Tests
Multi-country, Multifactor Tests
This chapter examines test results from the Heckscher–Ohlin (HO) proposition in a multi-factor, multi-country framework that began with Maskus (1985) and Bowen, Leamer, and Sveikauskas (1987) and have continued to be carried out by Trefler (1993, 1995), Davis and Weinstein (2001), and others. It also considers empirical tests of the basic Heckscher–Ohlin–Vanek (HOV) relationship which states that the amount of a particular factor of production embodied in a country’s net trade of goods and services equals its endowment of this factor minus its share of world consumption times the world endowment of this factor. Among other topics covered are country-pair tests of the HO proposition and empirical investigations into the importance of intra-industry trade and increasing returns. The test of Helpman’s (1984) non-factor price equalization model undertaken by Choi and Krishna (2004) is also reviewed.
Keywords: Heckscher–Ohlin proposition, Heckscher–Ohlin–Vanek model, intra-industry trade, non-factor price equalization model
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