Factor Proportions and the Structure of Commodity Trade
American Economic Review
vol. 94,
no. 1, March 2004
(pp. 67-97)
Abstract
This paper examines how factor proportions determine the structure of commodity trade. It integrates a many-country version of a Heckscher-Ohlin model with a continuum of goods with Paul R. Krugman's (1980) model of monopolistic competition and transport costs. The commodity structure of production and bilateral trade is fully determined. Two main predictions emerge. Countries capture larger shares of world production and trade of commodities that more intensively use their abundant factors. Countries that rapidly accumulate a factor see their production and export structures systematically shift towards industries that intensively use that factor. Both predictions receive support from detailed trade data.Citation
Romalis, John. 2004. "Factor Proportions and the Structure of Commodity Trade." American Economic Review, 94 (1): 67-97. DOI: 10.1257/000282804322970715JEL Classification
- F11 Neoclassical Models of Trade
- F12 Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 Empirical Studies of Trade