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- Title
Development-related biases in factor productivities and the HOV model of trade.
- Authors
Maskus, Keith E.; Nishioka, Shuichiro
- Abstract
Past empirical failures of the basic Heckscher-Ohlin-Vanek (HOV) model related to the inability of data to meet its restrictive assumptions. Trefler (1993) tried to resuscitate HOV by introducing a simple Hicks-neutral (HN) factor-productivity adjustment. In this paper, we re-examine this question by estimating factor-specific productivities from the individual technology data of multiple developed and developing countries. We find evidence of factor-augmenting technological differences. Further, the ratios of factor productivities are strongly correlated with corresponding factor endowments. This systematic bias implies that the ability of HOV to explain North-South factor trade depends on both relative factor abundance and factor-augmenting productivity gaps.
- Subjects
PRODUCTION (Economic theory); DEVELOPING countries; DEVELOPED countries; FACTOR proportions; FACTORS of production; ECONOMIC development; INTERNATIONAL trade
- Publication
Canadian Journal of Economics, 2009, Vol 42, Issue 2, p519
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/j.1540-5982.2009.01518.x