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Development‐related biases in factor productivities and the HOV model of trade

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  • Keith E. Maskus
  • Shuichiro Nishioka
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. Le manque à donner un support empirique au modèle Hecksher‐Ohlin‐Vanek vient souvent du fait que les données ne s'arriment pas aux postulats restrictifs du modèle. Trefler (1993) a tenté de ressusciter le modèle HOV en introduisant un simple ajustement de la productivité des facteurs (neutre au sens de Hicks). Dans ce texte, on réexamine la question en calibrant les productivités spécifiques des facteurs à partir des données individuelles de technologies de plusieurs pays développés ou en voie de développement. On découvre des différences technologiques qui tendent à augmenter l'usage de facteurs. De plus les ratios de productivités des facteurs sont fortement co‐reliés aux dotations de facteurs. Ce biais systématique implique que la capacité du modèle HOV à expliquer le commerce Nord‐Sud des facteurs dépend à la fois de l'abondance relative des facteurs et des différentiels de productivités qui tendent à augmenter l'usage des facteurs.

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  • Keith E. Maskus & Shuichiro Nishioka, 2009. "Development‐related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 519-553, May.
    • Handle: RePEc:wly:canjec:v:42:y:2009:i:2:p:519-553
    DOI: 10.1111/j.1540-5982.2009.01518.x
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    16. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    17. Keith E. Maskus & Shuichiro Nishioka, 2009. "Development‐related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 519-553, May.
    18. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
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    22. Gordon H. Hanson & Robert C. Feenstra, 2000. "Aggregation Bias in the Factor Content of Trade: Evidence from U.S. Manufacturing," American Economic Review, American Economic Association, vol. 90(2), pages 155-160, May.
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    Cited by:

    1. Chen, Maggie Xiaoyang & Joshi, Sumit, 2010. "Third-country effects on the formation of free trade agreements," Journal of International Economics, Elsevier, vol. 82(2), pages 238-248, November.
    2. repec:wvu:wpaper:09-03 is not listed on IDEAS
    3. Fisher, Eric O'N., 2011. "Heckscher-Ohlin theory when countries have different technologies," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 202-210, April.
    4. Kris James Mitchener & Se Yan, 2014. "Globalization, Trade, And Wages: What Does History Tell Us About China?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 131-168, February.
    5. Robert Stehrer, 2014. "Does the Home Bias Explain Missing Trade in Factors?," wiiw Working Papers 110, The Vienna Institute for International Economic Studies, wiiw.
    6. Fadinger, Harald, 2011. "Productivity differences in an interdependent world," Journal of International Economics, Elsevier, vol. 84(2), pages 221-232, July.
    7. Keith E. Maskus & Shuichiro Nishioka, 2009. "Development‐related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 519-553, May.
    8. Marshall, Kathryn G., 2012. "International productivity and factor price comparisons," Journal of International Economics, Elsevier, vol. 87(2), pages 386-390.
    9. Kozo Kiyota, 2021. "The Leontief Paradox Redux," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 296-313, May.
    10. Eric O'N. Fisher & John Gilbert & Kathryn G. Marshall & Reza Oladi, 2015. "A New Measure of Economic Distance," CESifo Working Paper Series 5362, CESifo.
    11. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
    12. Artal-Tur, Andrés & Castillo-Giménez, Juana & Llano-Verduras, Carlos & Requena-Silvente, Francisco, 2011. "The factor content of regional bilateral trade: The role of technology and demand," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 157-172, April.
    13. Puzzello, Laura, 2012. "A proportionality assumption and measurement biases in the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 105-111.
    14. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
    15. Kris James Mitchener & Se Yan, 2010. "Globalization, Trade & Wages: What Does History tell us about China?," NBER Working Papers 15679, National Bureau of Economic Research, Inc.
    16. Muhammed A. Yildirim, 2014. "Implied Comparative Advantage," CID Working Papers 276, Center for International Development at Harvard University.
    17. Yan, Yunfeng & Wang, Ran & Zheng, Xiuxiu & Zhao, Zhongxiu, 2020. "Carbon endowment and trade-embodied carbon emissions in global value chains: Evidence from China," Applied Energy, Elsevier, vol. 277(C).
    18. Nishioka, Shuichiro, 2013. "R&D, trade in intermediate inputs, and the comparative advantage of advanced countries," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 96-110.
    19. repec:wvu:wpaper:09-13 is not listed on IDEAS
    20. Cristiano, Antonelli, 2019. "The creative response and international trade11The comments of the anonymous referees and the editor are gratefully acknowledged. The funding of my Department are acknowledged," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 445-452.
    21. Davide Gandolfi & Timothy Halliday & Raymond Robertson, 2017. "Trade, FDI, migration, and the place premium: Mexico and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 1-37, February.
    22. repec:wvu:wpaper:09-02 is not listed on IDEAS
    23. Nishioka, Shuichiro, 2012. "International differences in production techniques: Implications for the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 98-104.
    24. Hausmann, Ricardo & Stock, Daniel P. & Yıldırım, Muhammed A., 2022. "Implied comparative advantage," Research Policy, Elsevier, vol. 51(8).
    25. Andrés Artal‐Tur & Carlos Llano‐Verduras & Francisco Requena‐Silvente, 2010. "Factor productivity differences and missing trade problems in a regional HOV model," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 759-776, November.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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