Factor Trade Forensics with Traded Intermediate Goods

August 2011 Draft

Abstract: Recent work studying the factor content of trade raises measured factor content by allowing differences in productivity and/or techniques of production across countries. Reimer (2006) and Trefler and Zhu (2010) criticize this work for its treatment of intermediate goods. Using a definition of factor content that allow for traded intermediates, I decompose the separate influence of production techniques and traded intermediate goods in shaping factor trade. I document that trade in intermediate goods lowers measured factor contents, but substantial factor trade remains and is directionally consistent with factor abundance theory.