I am having trouble understanding this graph from Trefler 1995 paper 'The case of missing trade'
Ffc = Vfc - Sc(Vfw)
Where Ffc is the factor component of exports
Vfc is the factor endownments of the country
Sc is the ratio of home consuption over world consuption
Vfw is world factor endownments
Epsilonfc on the Y axis is Ffc - (Vfc - Sc(Vfw))
Or in other words the deviations from the Hecksher Ohlin Theorem.
What i don't understand is that the zero trade line is diagonal, shouldn't it be verticle over the point where Vfc - Sc(Vfw) = 0.
Secondly this paper criticises the HO model as performing terribly, but in this graph it seems to be that the deviations from the HO model are all centered around zero, which would seem to suggest a good model. I'm sure i am missing something here.
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