A Century of Missing Trade?

22 Pages Posted: 17 May 2001  

Antoni Estevadeordal

Inter-American Development Bank (IADB)

Alan M. Taylor

University of California, Davis - Department of Economics; University of Virginia - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: May 2001

Abstract

In contemporary data, the measured factor content of trade is far smaller than its predicted magnitude in the pure Heckscher-Ohlin-Vanek framework, the so-called 'missing trade' mystery. We wonder if this problem has been there from the beginning: that is, we ask if the Heckscher-Ohlin theory was so much at odds with reality at its time of conception. We apply contemporary tests to historical data, focusing on the major trading zone that inspired the factor abundance theory, the Old and New Worlds of the pre-1914 'Greater Atlantic' economy. This places our analysis in a very different context than contemporary studies: an era with lower trade barriers, higher transport costs, a more skewed global distribution of the relevant factors (especially land), and comparably large productivity divergence. These conditions might seem more favorable to the theory, but the results are still very poor.

Suggested Citation

Estevadeordal, Antoni and Taylor, Alan M., A Century of Missing Trade? (May 2001). NBER Working Paper No. w8301. Available at SSRN: https://ssrn.com/abstract=270371

Antoni Estevadeordal

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
202-623-2614 (Phone)
202-623-3030 (Fax)

Alan M. Taylor (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-1572 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/amtaylor/

University of Virginia - Department of Economics ( email )

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Charlottesville, VA 22904-4182
United States
(434)-924-3177 (Phone)
(434)-982-2904 (Fax)

HOME PAGE: http://people.virginia.edu/~amt7u

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

HOME PAGE: http://nber.org

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

HOME PAGE: http://cepr.org

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