GEP The Leverhulme Centre for Research on Globalisation and Economic Policy

GEP Research Paper 07/11

Predicting the Factor Content of Foreign Trade: Theory and Evidence

Daniel M. Bernhofen

Abstract

This paper examines the multi-cone specification of the factor proportion theory of international trade. I show that Helpman's bilateral restrictions on the factor of content of trade, which have found recent empirical support by Choi and Krishna (2004), need to be amended to account for multilateralism. I identify additional restrictions and show that these restrictions form the building block for a multi-cone factor content prediction which generalizes Alan Deardorff's well-known chain of comparative advantage prediction to multiple countries and factors. Applying Choi and Krishna 's data set to this multi-lateral specification, I find little empirical support for the multi-cone prediction.

Issued in March 2007.

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