GEP Research Paper 06/20
Skill Content Tests of Endowment Models of Inter-and Intra-Industry Trade: Evidence for Some High Income Countries
Manuel Cabral, Rod Falvey and Chris Milner
Abstract
The present study compares the results of factor (skill) content tests for different types of trade flows under alternative assumptions about the technologies used to produce imports and exports. Using data on trade, technologies (skill requirements) and national endowments for some high income countries, we show that the match between the actual factor content of trade and that predicted by endowments in an H-O-V framework improves substantially if technological heterogeneity across countries is allowed for and if the factor content of intra- industry trade (in particular in vertically differentiated goods) is included along with that in inter-industry or net trade.
Issued in July 2006.
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