The Heckscher-Ohlin-Vanek Theorem and International Factor Price Differences

This paper demonstrates the importance of accounting for absorption of inputs in a model of factor-augmenting international productivity differences when examining the consistency of international factor price differences with the Heckscher-Ohlin-Vanek (HOV) theorem. It is shown that the absence of such accounting has non-trivial implications in the form of introducing a bias in the calculation of productivity parameters based on the HOV theorem. Copyright Springer Science + Business Media, Inc. 2005