Econometrica: May, 1988, Volume 56, Issue 3

Trade Patterns under Uncertainty with Country Specific Shocks

https://doi.org/0012-9682(198805)56:3<645:TPUUWC>2.0.CO;2-U
p. 645-659

Elhanan Helpman

The Helpman-Razin model of international trade under uncertainty is extended to allow for country specific productivity shocks. It is shown that for the multiple-sector multiple-factor case there exists a set of interesting sufficient conditions under which it is possible to predict the pattern of international trade in securities, goods, and factor content, on the basis of cross-country differences in factor endowments. It is shown that under these circumstances some well known empirical tests have to be modified.