Factor productivity differences and missing trade problems in a regional HOV model

Journal ar
Papers in Regional Science
  • Volumen: 89
  • Número: 4
  • Fecha: 01 November 2010
  • Páginas: 759-776
  • ISSN: 10568190 14355957
  • Source Type: Journal
  • DOI: 10.1111/j.1435-5957.2009.00266.x
  • Document Type: Article
Recent empirical papers testing the performance of the Heckscher-Ohlin-Vanek (HOV) model suggest the need to relax its restrictive assumptions in order to reconcile the theory with the data. This paper examines whether introducing factor productivity differences could help to improve the performance of the HOV model in a regional setting. Using a new dataset of 17 Spanish regions and three different HOV specifications, this paper seeks the existence of Hicks-neutral (HN) or factor-augmenting industry-neutral (FAIN) technological differences. The data support the existence of HN technological differences, which contributes to a remarkable improvement of the regional HOV performance since the so-called missing trade problem largely disappears. © 2009 The author(s). Papers in Regional Science © 2009 RSAI.

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