Working Paper: NBER ID: w11221
Authors: Daniel Trefler; Susan Chun Zhu
Abstract: The last decade witnessed an explosion of research into the impact of international technology differences on the factor content of trade. Yet the literature has failed to confront two pivotal issues. First, with international technology differences and traded intermediate inputs there does not exist a Vanek-consistent definition of the factor content of trade. Restated, we do not know what we are trying to explain! We fill this gap by providing the correct definition. Second, as Helpman and Krugman (1985) showed, many models beyond Heckscher-Ohlin imply the Vanek prediction. So what model is being tested? We completely characterize the class of models being tested by providing a familiar `consumption similarity' condition that is necessary and sufficient for the Vanek prediction. We illustrate with a unique dataset containing input-output tables for 41 rich and poor countries. We find modest support for the strong version of the Vanek prediction and impressive support for weaker versions of the prediction.
Keywords: No keywords provided
JEL Codes: F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| correct definition of factor content of trade (F16) | better empirical outcomes (C90) |
| international technology differences (O33) | factor content of trade (F10) |
| factor content of world exports (F10) | endowments across countries (O57) |
| consumption similarity condition (D10) | robustness of the Vanek prediction (C59) |
| weaker versions of the Vanek prediction (D11) | empirical backing (C90) |