The Heckscher-Ohlin-Vanek (HOV) theorem, which predicts that countries will export products that are made from factors in great supply, performs poorly. However, deviations from HOV follow pronounced patterns. Trade is missing relative to its HOV prediction. Also, rich countries appear scarce in...

Increasingly, a small number of low-wage countries such as China and India are involved in incremental innovation. That is, they are responsible for resolving production line bugs and suggesting product improvements. We provide evidence of this new phenomenon and develop a model in which there...

Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not 'big ideas' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new phenomenon and develop a model in which there is a...

Each worker brings a bundle of skills to the workplace, for example, quantitative and communication skills. Since employers must take this bundle as a package deal, they choose workers with just the right mix of skills. We show that international differences in the distribution of worker skill...

Trade theorists continue to puzzle over their surprisingly small estimates of the impact of trade liberalization o n imports. All explanations of the puzzle treat trade liberalization as a given but the level of trade protection is not exogenous. The theo ry of endogenous protection predicts...

The last decade witnessed an explosion of research into the impact of international technology differences on the factor content of trade. Yet the literature has failed to confront two pivotal issues. First, with international technology differences and traded intermediate inputs, there is no...

Market size matters for innovation and hence for productivity. Improved access to foreign markets will thus encourage firms to simultaneously export and invest in raising productivity. We examine this insight using the responses of Canadian plants to the elimination of U.S. tariffs. Unique...

The rising prominence of intra-industry trade and huge multinationals has transformed the way economists think about the gains from trade. In the past, we focused on gains that stemmed either from endowment differences (wheat for iron ore) or inter-industry comparative advantage (David Ricardo's...

The Canada-U.S. Free Trade Agreement (FTA) provides a unique window onto the effects of a reciprocal trade agreement on an industrialized economy (Canada). For industries that experienced the deepest Canadian tariff cuts, employment fell by 12 percent and labour productivity rose by 15 percent...