Empirical Tests of the HOS Hypothesis: The Factor Content Studies

Following the tenets of scientific methodology, the HOS hypothesis has been subjected to quite rigorous tests. Starting with Leontief’s (1954) seminal paper, a vast amount of work has been done to test the empirical validity of the HOS theorem. As we know, the theorem is most robust in its two-good, two-factor, two-country form. One of the fundamental problems has been to apply the simple model to a multi-good, multi-factor, multi-country real world. The HOS theorem postulates a triple relationship between the following variables: (i) relative abundance of internationally homogeneous factors, (ii) factor-intensity determined by internationally identical technology, and (iii) direction of trade (exports and imports). A valid procedure of empirical test should incorporate all the three variables. As we will see, it is not so easy to accomplish this desired goal.