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CEP discussion paper
Factor Endowments and Production in European Regions
Stephen J. Redding and Mercedes Vera-Martin
July 2001
Paper No' CEPDP0501:
Full Paper (pdf)

JEL Classification: F11; F14; R13

Tags: factor endowments; heckscher-ohlin; specialization; european integration

This paper analyses patterns of production across 14 industries in 45 regions from 7 European countries since 1975. We estimate a structural equation derived directly from Heckscher-Ohlin theory that relates an industry's share of a region's GDP to factor endowments and relative prices. Factor endowments are found to play a statistically significant and quantitatively important role in explaining production patterns. The explanation is most successful for aggregate industries, such as Agriculture, Manufacturing, and Services, and works less well for disaggregated industries within Manufacturing. We find no evidence that increasing European integration has weakened the relationship between factor endowments and production patterns within countries.