U.S. technology and the specific-factors model

This paper reports empirical estimates of one of the most popular models of internaional trade theory, the specific-factors model. The two outputs - consumption goods and investment goods - and two factors - labor and capital - are considered. Labor is assumed to be mobile between sectors, while capital is assumed to be sector specific. Assuming that the relative supplies of the two types of capital are constant through time, the model can be estimated with aggregate data even though the sector-specific capital stocks are not observable. Empirical results show that the model does substantially better than under the Heckscher-Ohlin production structure.