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Trade Patterns under Uncertainty with Country Specific Shocks
Elhanan Helpman
Abstract
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.
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