Data Management

Leontief Was Not Right After All

Date Added: Jan 2010
Format: PDF

Exploiting recent international data on factor usage by sector, the authors provide the first direct test of Leontief's notion of factor-specific productivity differences. This test strongly rejects Trefler's [8] generalization of Leontief's idea. Hence tests of the Heckscher-Ohlin paradigm cannot be based upon such simple technological differences across countries. Basing his empirical analysis on a simple version of the Heckscher-Ohlin model, Trefler used data on endowments and the factor content of trade to compute 32 of these matrices, each with ten different factors. His reference country was the United States, and these parameters were computed so that the measured and predicted factor contents of trade were exactly equal.