The factor content of net trade for the OECD countries

Abstract

Applies the two‐factor version of the Heckscher‐Ohlin‐Vanek (HOV) theorem. Two hypotheses are derived. The empirical analysis offers support for the second but not for the first hypothesis when trade of each Organization for Economic Co‐operation and Development (OECD) country with the rest of the world is analysed. Examines the factor content of net trade with data on foreign trade between the OECD countries and then determines average capital‐labour ratio as the OECD average. Both the hypotheses receive empirical support. Finds that the two‐factor version of the HOV theorem performs well when applied to the environment where it is supposed to apply.