We derive testable restrictions relating the factor content of bilateral trade to bilateral differences in technology and endowments. This departs from the Heckscher-Ohlin-Vanek theorem which compares the factor content of net trade with factor abundance. We test the theoretical restrictions using a unique dataset that covers 41 developed and developing countries with disparate endowments and technology. We find evidence supporting the predictions. In addition: (1) The factor content predictions perform best for country pairs with larger endowment differences, and (2) for trade between capital-abundant countries, Ricardian international technology differences matter more than Heckscher-Ohlin factor endowment differences.
- Factor content of bilateral trade
- Heckscher-Ohlin model
- Ricardian technology differences
ASJC Scopus subject areas
- Economics and Econometrics