Factor Proportions and the Structure of Commodity Trade By JOHN ROMALIS*

This paper examines how factor proportions determine the structure of commodity trade. It integrates a many-country version of a Heckscher-Ohlin model with a continuum of goods with Paul R. Krugman’s (1980) model of monopolistic compe-tition and transport costs. The commodity structure of production and bilateral trade is fully determined. Two main predictions emerge. Countries capture larger shares of world production and trade of commodities that more intensively use their abundant factors. Countries that rapidly accumulate a factor see their production and export structures systematically shift towards industries that intensively use that factor. Both predictions receive support from detailed trade data. (JEL F12, F14) The Heckscher-Ohlin model is one of the pillars of international trade theory. The insight that commodity trade embodies factor services is a profound one, underpinning important the-orems relating factor abundance, factor prices, product prices, production, and trade. Predic