Professor Jones' Re-appraisal of Heckscher-Ohlin Trade Flows
Thijs ten Raa
Abstract
Jones (2008) questions Leontief's procedure to test if a country's trade pattern is according to the Heckscher-Ohlin theory of factor abundance.† In a Heckscher-Ohlin framework he shows that the country with the higher capital/labor endowment ratio may export a relatively labor-intensive commodity whereas its import-competing sector is more capital-intensive.† In this paper I argue that imports which drive domestic producers out of the market should enter the calculation.† This observation is shown to resurrect Leontief's procedure.† Finally, I shed some light on his paradox that American exports are more labor intensive than its imports.
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