Testing Hecksher Ohlin Theory : Evidence From Singapore In 1991-2016

English

Abstract

This research aims to test Hecksher Ohlin's theory with a capital-intensive country in Asia, namely Singapore with the research period 1991-2016. The time period was chosen to avoid a significant shock, namely the covid 19 that occurred in 2020. However, taking into account the effect of the Asian financial crisis in 1997, the 1991 - 2016 time period was chosen. The data used and obtained are from the World Bank. We examine the variables of labor, investment, consumer price index and export. This study uses VECM Modelling. According to Hecksher Ohlin's theory, a capital-intensive country like Singapore will export its goods and services which has a positive and significant relation with investment. The research's findings support the Hecksher-Ohlin Theory. However, employment is also positively related to investment in Singapore. This is very rational even though Singapore uses a capital-intensive system but still requires manpower. Likewise, the CPI is also significantly positive regarding investment in Singapore, proving that Singapore's production is not only for export orientation but also to meet domestic consumption.