NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Judging Factor Abundance

Harry P. Bowen, Leo Sveikauskas

NBER Working Paper No. 3059
Issued in August 1989
NBER Program(s):International Trade and Investment, International Finance and Macroeconomics

Recent theoretical developments have cast doubt on the reliability of the commonly used cross-industry regression as a method for inferring a country's abundant factors. This paper examines the empirical importance of these theoretical cautions by comparing regression derived estimates of factor abundance with both revealed and actual factor abundances for thirty-five countries and up to twelve resources. Trade imbalances are found to importantly affect the regression estimates and we therefore derive and implement a theoretically consistent trade balance correction. The results indicate that despite theoretical concerns, the regression measures are often reliable indicators of revealed factor abundances. The results therefore enhance the credibility of the findings of the numerous regression studies that have been conducted over the past thirty years.

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Document Object Identifier (DOI): 10.3386/w3059

Published: Quarterly Journal of Economics, Vol. 107, no. 2 (1992): 599-620. citation courtesy of

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