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

May 1, 1999

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Dalia S Hakura. A Test of the General Validity of the Heckscher-Ohlin Theorem for Trade in the European Community, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Consumption, Exports, Imports, International trade, National accounts, Technology, Trade balance, Trade in goods

Keywords: Consumption, Country pair, Europe, Exports, Factor content, Heckscher-Ohlin theorem, HOV theorem, HOV theory, Imports, Input requirement, Input-output matrix, International technology differences, Net exporter, Trade balance, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/070
Stock No:

WPIEA0701999
ISBN:

9781451849134
ISSN:

1018-5941

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