The Heckscher-Ohlin versus Linder's Theory: evidence from Malaysian exports.

This paper analyzes the export destinations of Malaysia and top six trading partners (an average from 1995 - 2012) using gravity model and pooled ordinary least square (OLS) analysis. As suggested by the pioneer of gravity model (Tinbergen, 1962), the vibrancy of trading activities depend on the resemblance of exporting and importing countries which in parallel with Staffan Linder theory of trade(1961). These include similarities such as GDP per capita, international language, and border sharing and taste in product consumed (Morales, Sheu and Zahler, 2014).The theory also highlights that the distance between the two trading countries have significant effect on trading activities. However, the empirical study in the case of Malaysia proven opposite effect thus allowing Heckscher-Ohlin theory to be highlighted in contrast to Linder theory as H-O theory suggests that a particular country will trade with another country with dissimilar economic performance level. The general finding of this study suggest that Malaysia is more towards Linder theory based on the coefficient sign of GDP per capita differential. [ABSTRACT FROM AUTHOR]