Does Skill Content Explain Total Trade and Intra-Industry Trade?

This study compares the results of skill content tests for types of trade flows under alternative assumptions about the technologies used to produce imports and exports. For trade between high- and middle-income countries, we show that the match between the actual skill content of trade and that predicted by endowments in a Heckscher-Ohlin-Vanek framework improves substantially if technological heterogeneity across countries is allowed for and if the factor content of intra-industry trade is included with that of inter-industry trade. Endowment differences are important in explaining net trade and vertical intra-industry trade, but not horizontal intra-industry trade. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.