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Relativity in Trade Theory: Towards a Solution to the Mystery of Missing Trade

Author

Listed:
  • Eric O'N. Fisher
  • Sharon L. May
Abstract
Using OECD input output matrices consistently, we offer a tentative solution to the mystery of missing trade. First, we confirm the usual rejection of factor price equalization and identical technologies. Second, we develop a new technique to compute the factor content of trade when countries’ technologies are different. Measuring factor content conventionally, we find a putative paucity of trade in these data. When factor content is measured correctly, theory predicts the direction and volume of trade more accurately. Thus measuring the factor content of trade according to the country of origin may vindicate the Heckscher-Ohlin-Vanek paradigm.

Suggested Citation

  • Eric O'N. Fisher & Sharon L. May, 2006. "Relativity in Trade Theory: Towards a Solution to the Mystery of Missing Trade," CESifo Working Paper Series 1818, CESifo.
    • Handle: RePEc:ces:ceswps:_1818
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1818.pdf
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    References listed on IDEAS

    as
    1. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
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    8. Antoni Estevadeordal & Alan M. Taylor, 2002. "A Century of Missing Trade?," American Economic Review, American Economic Association, vol. 92(1), pages 383-393, March.
    9. Alan B. Krueger, 1999. "Measuring Labor's Share," American Economic Review, American Economic Association, vol. 89(2), pages 45-51, May.
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    14. 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.
    15. repec:fth:prinin:413 is not listed on IDEAS
    16. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
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    Cited by:

    1. Muhammad Jamali & Asif Shah & Hassan Soomro & Kamran Shafiq & Faiz M.Shaikh, 2011. "Oil Price Shocks: A Comparative Study on the Impacts in Purchasing Power in Pakistan," Modern Applied Science, Canadian Center of Science and Education, vol. 5(2), pages 192-192, April.

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