THE CASE OF THE MISSING TRADE AND OTHER MYSTERIES

The Heckscher-Ohlin-Vanek (HOV) theorem, which predicts that countries will export products that ave made from factors in great supply, perf orms poorly. However, deviations from HOV follow pronounced patterns. Trade is missing relative to its HOV prediction. Also, rich countries appear scarce in most factors and poor countries appear abundant in al l factors, a fact that squares poorly with the HOV prediction that abu ndant factors are exported. As suggested by the patterns, HOV is rejec ted empirically in favor of a modification that allows for home bias i n consumption and international technology differences.