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Issue Q1 2019  
The chain version of Heckscher-Ohlin theory correctly predicts U.S. trade flows!  
Nevin Cavusoglu
The chain version of the Heckscher-Ohlin theorem has only been tested by Cavusoglu and Elmslie (2005), with findings that fail to provide empirical support to its predictions. The present paper expands on that study and presents different results. Using data on capital-labor intensities, and exports and imports for ten manufacturing and three service sectors for the U.S. from 1970 to 2009, the predictions of the theory are confirmed by the data. These results are robust to different price indices, labor measures, and weight measures used to construct net export data. The difference in results between the two studies can be explained by the use of different capital stock data, as well as the longer time frame of the current study.


International trade ; Chain Heckscher-Ohlin ; Keywords
F11 ; F14 ; JEL classification
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