Factor proportions and the growth of world trade

Robert Zymek

Research output: Contribution to journalArticlepeer-review

Abstract

Most of the expansion of global trade since 1980 has been of the North–South kind — between capital-abundant developed and labour-abundant developing countries. Based on this observation, I argue that the recent growth of world trade is best understood from a factor-proportions perspective. Using data on trade barriers and estimates of capital–labour ratios for a group of 45 economies between 1980 and 2008, I find that a calibrated factor-proportions model can generate significant trade growth during this period, amounting to 90% of the observed rise in North–South trade. The opening up of China alone accounts for three quarters of the predicted increase. In line with the model, I present evidence that China's liberalisation has raised the exports and imports of capital-abundant countries relative to more labour-abundant economies. Overall, my findings suggest that factor-proportions theory may be useful for interpreting several quantitative and qualitative aspects of growing world trade in a period during which the group of large, open economies has become significantly less homogenous.
Original languageEnglish
Pages (from-to)42-53
Number of pages12
JournalJournal of International Economics
Volume95
Issue number1
Early online date29 Oct 2014
DOIs
Publication statusPublished - Jan 2015

Keywords

  • Heckscher-Ohlin
  • international trade
  • China

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