An Empirical Test of the Heckscher-Ohlin Model in OECD Countries : A Data Envelopment Analysis Approach

In empirically validating the Heckscher-Ohlin (H-O) model of trade, the preponderant majority of the literature has concentrated on the net factor content of trade. Contrastingly, by utilizing an industrial-level data set of nine OECD countries, this paper applies data envelopment analysis technique to the H-O model of trade by decomposing relative change in industrial output into change in relative sectoral efficiency, change in technology, and change in factor endowments. The findings indicate the change in output and factor endowments generally confirms to the prediction of the Rybczynski theorem and thus indirectly lends credence to the validity of the H-O model. Furthermore, technological change is established as non-neutral and biased towards capital-intensive industries in OECD countries