The Performance of the Heckscher-Ohlin-Vanek Model in Predicting Endogenous Policy Forces at the Individual Level

Abstract

This study tests the hypothesis that agents base their opinions about trade liberalization on the distribution effects as predicted by the Heckscher-Ohlin-Vanek (HOV) model. The HOV model is utilized to derive the probable effect of a liberalization move on the returns to different Canadian occupations. The predicted effect is then compared with the opinions that Canadians with known occupations held about the proposed Canadian-U.S. Free Trade Agreement of 1988. It is found that these agents took positions that were generally consistent with the prediction from the HOV model.