Abstract
Trade in goods is also implicitly trade in the services of the factors used to produce those goods. This insight underlies the Heckscher–Ohlin–Vanek model of factor service trade, and provides a laboratory to test our theories concerning world general equilibrium. In recent years this theory has undergone close empirical scrutiny. Early tests strongly rejected the simplest variants of the theory. More recent tests have imposed a modest number of additional restrictions suggested by the data. These involve cross-country heterogeneity in productivity, factor prices, consumption patterns, and the incorporation of non-traded goods. With these restrictions, the model fares well.
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Davis, D.R. (2018). Factor Content of Trade. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2249
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2249
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