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Journal of Economic Integration 2009 December;24(4) :744-764.
DOI: https://doi.org/10.11130/jei.2009.24.4.744
Relative Endowments and the Volume of Trade
Kwok Tong Soo 
Lancaster University
Copyright ©2009 Journal of Economic Integration
ABSTRACT

This paper provides evidence that the volume of trade may increase as countries' relative endowments become more similar. A model is developed that can explain this phenomenon. The model is a four-good version of the Davis (1995) Heckscher-Ohlin-Ricardo model of international trade based on technological and factor endowment differences across countries. In the model, trade volumes may increase with greater similarity in relative endowments, because productivity differences across countries mean that countries' production becomes increasingly specialised the more similar are their relative endowments.

JEL Classification: F11

Keywords: international trade | trade volume | integrated equilibrium
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