(DP 1982-10) Factor Proportions and the Direction of International Trade: An Application of Factor Analysis

Abstract

In this paper, a method which is different from that used by Leontief in testing the validity of the conclusions of the Heckscher-Ohlin theorem is recommended. We note that the empirical significance of the theorem can be established only if both its assumptions and its conclusions are satisfied. However, Robinson observes that these assumptions are too demanding to be likely to fit any real-life circumstances. Thus, only the empirical significance of the conclusions of the theorem, rather than the theorem itself, can be established or nullified. Nevertheless, the test result could be useful in a study of the allocation of the country's relatively abundant and scarce resources and possibly, as pointed out by Leontief, its participation in the international division of labor.