Factor intensity reversals redux: Feenstra is right!

Abstract Two‐ or more‐factor general equilibrium models commonly assume no factor intensity reversals (FIRs): a good that is relatively capital intensive compared with other goods within country/region also another country/region. This assumption so important its breakdown results in the collapse of several well‐known theorems, such as Heckscher–Ohlin theorem and Stolper–Samuelson theorem. Seeing recent observation, however, Feenstra (2015, Advanced international trade: Theory evidence (2nd ed.) , Princeton University Press) argues FIRs are quite realistic. Our nonparametric test finds regional‐level data support his view. At two‐digit industry level, degree among regions higher than those found previous studies, which accompanied by wide differences relative prices regions. The has increased over last two decades. even stronger at disaggregated four‐digit level and, though not many, exist two‐aggregated‐industry well. all three levels, do disappear when we take into account factors human land. Thus, considering model without restrictions on might be possible direction research.