PREDICTING THE PATTERN OF INTERNATIONAL SPECIALIZATION IN THE NEOCLASSICAL TRADE MODEL: A SYNTHESIS
I propose a framework for thinking about the predictability of a theory. A set of conceivable outcomes is taken as the primitive and a theory is said to make a prediction by identifying a subset on the set of conceivable outcomes. I use this notion of predictability as an organizing principle for characterizing pattern of international specialization in the neoclassical trade model. I identify " local/global efficiency " as the unifying subset selection criterion for the different formulations of the neoclassical trade model, ranging from Ricardo's (1817) labour content formulation to the empirically relevant multi-cone Heckscher-Ohlin specification with multiple countries, goods and factors.