International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition
IMF Working Papers, March 1, 2001
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- International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition
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Bibliographic details
- Authors: Ehsan U. Choudhri, Dalia S Hakura
- Published: March 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451846102.001
Summary
- A large data set on trade in manufactured products is used to evaluate the performance of a model that combines both the Ricardian and Heckscher-Ohlin effects and incorporates monopolistic competition.
- The paper estimates a relation implied by the model to explain relative sectoral exports of major countries to a number of important markets, using 1970-90 data for nine manufacturing sectors.
- The relation fits the data well and variables suggested by both traditional and new trade models play an important role in explaining relative exports.
Data and Methods
- Data coverage: 1970-90.
- Sectors analyzed: nine manufacturing sectors.
- Empirical approach: estimation of a relation implied by a model combining Ricardian effects, Heckscher-Ohlin effects, and monopolistic competition.
- Estimation technique referenced: least squares (as listed in Keywords).
Key Findings
- The estimated relation provides a good fit to observed relative sectoral exports across major countries and important markets.
- Variables from both traditional trade models (Ricardian and Heckscher-Ohlin) and new trade models (monopolistic competition, productivity differentials) are important in explaining relative exports.
- Productivity-related measures emphasized: Total factor productivity (TFP ratio, TFP relations, productivity variable).
Policy-Relevant Themes and Implications
- Competition and trade barriers are significant determinants of manufactured goods export performance.
- Composite-factor cost ratios and productivity differences (TFP measures) are key explanatory variables for relative exports across sectors and countries.
- The combined Ricardian-Heckscher-Ohlin framework with monopolistic competition can serve as an analytical basis for assessing how comparative advantage, factor endowments, and firm-level market structure jointly shape trade outcomes.