OECD Trade Policy Papers

This series is designed to make available to a wider readership selected trade policy studies prepared for use within the OECD.

NB. No. 1 to No. 139 were released under the previous series title OECD Trade Policy Working Papers.


The Role of Factor Content in Trade

Have Changes in Factor Endowments Been Reflected in Trade Patterns and on Relative Wages?

The pattern of trade analysed from a factor content perspective reflects the relative factor endowments of the countries examined. Although some large economies, such as the United States, seem to exhibit counter-intuitive behaviour, this is reversed when intermediate trade is taken into account. We argue this is a reflection of the changing nature of production processes and trade. The evidence presented here implies factor endowments are undergoing changes that call for careful analysis of the measures commonly used in trade. Acknowledging the role of intermediate goods to understand a country‘s factor content trade position is one step. Additionally, one must account for the interaction between the domestic determination of employment and wages with international movement of goods and services, and location of tasks.


Keywords: wages, intermediate inputs, comparative advantage, factor content
JEL: F0: International Economics / General; F14: International Economics / Trade / Empirical Studies of Trade; F20: International Economics / International Factor Movements and International Business / International Factor Movements and International Business: General
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