TY  - JOUR
AU  - Bernstein,Jeffrey R.
AU  - Weinstein,David E.
TI  - Do Endowments Predict the Location of Production?  Evidence from National and International Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6815
PY  - 1998
Y2  - November 1998
UR  - http://www.nber.org/papers/w6815
L1  - http://www.nber.org/papers/w6815.pdf
N1  - Author contact info:
Jeffrey I. Bernstein
Department of Economics
University Park Campus
Florida International University
11200 S.W. 8th Street
Miami, FL 33199
Tel: 305/348-2592
E-Mail: jeffrey.bernstein@fiu.edu

David Weinstein
Columbia University, Department of Economics
420 W. 118th Street
MC 3308
New York, NY  10027
Tel: 212/854-6880
Fax: 212/854-8059
E-Mail: dew35@columbia.edu
AB  - Examining the relationship between factor endowments and production patterns using international and Japanese regional data, we provide the first empirical confirmation of Ethier's correlation approach to the Rybczynski theorem. Moreover, we find evidence of substantial production indeterminacy.  Prediction errors are six to thirty times larger for goods traded relatively freely.  A compelling explanation of this phenomenon is the existence of more goods than factors in the presence of trade costs. This result implies that regressions of trade or output on endowments have weak theoretical foundations.  Furthermore, since errors are largest in data sets where trade costs are small, we explain why the common methodology of imputing trade barriers from regression residuals often leads to backwards results.
ER  -