The case of the missing trade and other mysteries

The Heckscher-Ohlin-Vanek (HOV) theorem, which predicts that countries will export products that ave made from factors in great supply, performs poorly. However, deviations from HOV follow pronounced patterns. Trade is missing relative to its HOV prediction. Also, rich countries appear scarce in most factors and poor countries appear abundant in all factors, a fact that squares poorly with the HOV prediction that abundant factors are exported. As suggested by the patterns, HOV is rejected empirically in favor of a modification that allows for home bias in consumption and international technology differences.