International Factor Price Differences: Leontief was Right!
Journal of Political Economy
1993
The factor price equalization hypothesis is widely at odds with the large variation in factor prices across countries. Similarly, the Heckscher-Ohlin-Vanek (HOV) theorem constitutes an incomplete description of trade in factor services: its predictions are always rejected empirically. These two issues are examined using a modification of the HOV model that allows for factor-augmenting international productivity differences. The empirical results are stark: this simple modification of the HOV theorem explains much of the factor content of trade and the cross-country variation in factor prices.
- DOI
- 10.1086/261911
- Volume
- 101 (6)
- Pages
- 961-987
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref