Multiregion, multifactor Test of the Heckscher-Ohlin-Vanek using sapnish regional data

Abstract

We study the Heckscher-Ohlin-Vanek (HOV) model of trade empirically using regional data rather than country data. Unlike Davis et al. (1997) that find that the HOV model performs remarkably well using Japanese regional data, our findings for the Spanish regions suggest that the HOV model performs poorly after relaxing the “strict” assumptions of world factor price equalisation, world identical and homothetic preferences and Hicks-neutral technological differences across regions. The limited explanatory capacity of the endowment-driven models complements the findings of economic geography models that predict well the regional pattern of production and trade specialization of Spanish regions.