15
P(X&M)'V&sVw
7 Trade of factor service
(X&M) is a vector with values of net exports distributed on commodities like million DDK
TV-sets and million DKK furniture. V is Denmark’s factor endowment like total number of
unskilled labour and total number of high educated labour. Vw is world factor endowment and s
is Denmark’s share of world consumption (absorption). The equation says that net-export
reflect relative factor endowment. A country (or a region) with many high educated will export
goods and services, that require high educated labour, and a country with many unskilled will
export goods and services, that require unskilled labour.
The fact, that intraindustry trade between similar affluent OECD countries accounts for the
larges share of world trade, is consistent with this conventional Hecksher-Ohlin-Vanek model,
as show by Davis (1997). For regional use of HOV Davis, Weinstein, Bradford & Shimpo
(1997) in the Japanese finds that it performs remarkably well. The same goes for regions in
USA (Kim 1995). A test in the case of Korea, however, suggest that the revealed factor
endowments departed significantly from actual supplies ( Ramazini and Maskus 1993).
Tests of HOV requires independent measures of its three concepts: factor intensities, net-
export and factor abundance (Leamer & Bowen 1981). Only the two first are available in this
study for Denmark. However, the aim of the study is not to test the theoretical model, but to
use it, since it is this model and its extensions, that lies behind the belief that low-skilled in
the north lost jobs/wages due to international competition. Globalization affects the right side
of 7 by an increase in world supply of low-skilled labour. In this study I compute the left side
of 7 in order disclose potential influence from changes on the right side for different
educational groups in Denmark.
Partial model for education and labour with factor price equalisation
To equations from the matrix expression (7) - the first for pure or raw labour and the second
for education - can be written as:
L X&L
E X&E
' L&sL
w
' E&sE
w