Empirical Testing of Inter-Industry Trade

Abstract

The first attempts at testing theories of inter-industry trade were made in 1951 and 1952 by MacDougall1 who produced results that were interpreted as supporting the Ricardian model’s explanation of trade patterns, and by Leontief2 in 1953, whose results cast doubt upon the Heckscher-Ohlin explanation (the famous ‘Leontief Paradox’). Since then there has been considerable work on refining the tests themselves, and on restating the models in ways which make them more suitable for testing. Following Verdoorn’s work3 in 1960 there has been another strand in the empirical analysis — testing theories of intra-industry trade. We shall deal with this in Chapter 9.