Comparative Advantages, Transaction Costs and Factor Content of Agricultural Trade: Empirical Evidence from CEE
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The present study examines factor content of the CEE transition country
agricultural trade. We examine the relative country abundance for labour,
capital and land, and test the Heckscher-Ohlin-Vanek (HOV) hypothesis. Our
empirical findings suggest that the factor content of agricultural exports and
imports is rather similar in CEE and most of the agricultural trade flows do
not satisfy the HOV prediction. In order to explain the general lack of agricultural specialisation and the observed paradox in the CEE's agricultural trade,
we examine the role of transaction costs and market imperfections. We find
that transaction costs and market imperfections distort farm specialisation and
hence factor content of agricultural trade.