Global Factor Trade with Differentiated Factor Prices and Factor Intensities

The assumption of internationally identical factor intensity techniques may be one of the major causes of the HOV model's poor performance. To relax this assumption, detailed input-output data are required to compute the factor intensity techniques used in different countries; however, these data are not readily accessible for many countries. This paper takes an alternative approach by introducing an inferring method that can infer the factor intensity techniques of different countries based on our knowledge about the US factor intensity techniques and the international factor price differences. The original HOV model is then modified accordingly