A BSTRACT According to the Heckscher-Ohlin-Vanek theorem, the net exports of a region are determined by relative abundance of the immobile factors of production. Empirical tests of this theory, usually at a high level of aggregation, have frequently not supported it. We find, instead, that data on interstate trade in wood products within the United States are in strong agreement with the theore...

Previous research has uncovered precious little support for Heckscher-Ohlin trade theory. This paper demonstrates that those efforts focus on an overly restrictive version of the model. Indeed, strong evidence that output is a function of endowments can be found if we recognize that countries with sufficiently disparate endowments specialize in different subsets of goods. This paper develops a ...

This paper investigates the consequences of designing domestic incentive regulation under asymmetric information in the general equilibrium context of an open economy. We discuss the implications of such incentive regulation for international specialization and the conditions for trade openness to be still welfare-improving. More specifically, we append to an otherwise standard 2× 2 Heckscher-O...

Utilizing simulation approach, this paper examines if the income distribution inequality of a country expands through globalization and/or innovation, somewhat modifying the traditional Heckscher–Ohlin model. First, independently of innovation, the globalization is examined for a country A with two industries (commodities) and four consumers: the (aggregate) worker, the (aggregate) capitalist, ...

Existing research suggests that democracy fosters economic globalization by promoting trade liberalization in the developing world. We argue that democracy in developing countries generates a “skill bias” in trade protection where democratic incumbents have incentives to increase tariffs on high skilled goods but reduce trade barriers on low skilled goods. Our model analyzes how electoral compe...

This paper incorporates Northern product innovation and product-cycle-driven technology transfer into the continuum-of-goods Heckscher-Ohlin model. The creation of very skill-intensive goods induces the North to transfer production of older, less skill-intensive goods to the South. These relocated goods must be the most skill intensive by Southern standards. Thus, product cycles raise the relat...

We study the production side of the Heckscher–Ohlin model empirically. The evidence we present suggests that the endowments of countries around the world are too dissimilar for all countries to be able to produce the same set of goods. In contrast, the endowments of the rich OECD countries are sufficiently similar, so that these countries do not have to specialize in different subsets of goods....

Do rich and poor countries export the same goods to the US? Using highly disaggregate trade flow data – which breaks US imports into thousands rather than tens of goods – this paper documents two significant trends. First, the number of US imports originating in either rich or poor countries exclusively has fallen dramatically as the world has globalized, from 50% in 1972 to 25% in 1994. This g...

There are two principal theories of why countries or regions trade: comparative advantage and increasing returns to scale. Yet there is virtually no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring “home market effects” with that o...