some goods are more heavily traded than others and that some countries (or pairs of countries) trade relatively more and in more goods than the average.

The vector _Zi,c_ includes all potential determinants of a country's trade structure that need to be controlled for, in particular, the role of countries' factor intensity in shaping its trade patterns. Standard trade models predict that countries should export relatively more those goods that are intensive in its abundant production factors (Heckscher et al. (1991)). Although this prediction has received mixed empirical support (Leamer (1980), Romalis (2004), Fitzgerald and Hallak (2004), among others), it is important to control for it by adding the interaction of measures of the factor intensity of a good and a measure of the factor abundance of a country, to avoid wrongly attributing to exchange rate volatility the role of dierences in factor abundance. Therefore, the empirical specication in equation (7) could be considered as an extension of the quasi-Heckscher-Ohlin model estimated by Romalis (2004), that adds the possibility that natural hedge may distort trade patterns beyond those explained by factor content. In this sense, it is also similar to the reduced form relation between sectoral output and endowments capturing the intuition of the Heckscher-Ohlin model estimated by Fitzgerald and Hallak (2004) to explain output composition among OECD countries.

Since there is no data on factor intensities for the broad set of goods considered in this paper, I construct a rough estimate of the factor intensity of a good by using actual trade patterns to compute the trade weighted average of the factor abundance of the countries that export it.<sup>6</sup> Under the assumption that trade patterns reect dierences in factor abundance, this measure would be akin to a revealed measure of factor intensity. If countries that are relatively abundant in a factor tend to concentrate a larger fraction of their exports in goods that are relatively intensive in the use of that factor, a revealed measure of factor intensity of commodity _h_ for factor _F_ , _φh_ ( _F_ ) , can be built from the within-country composition of trade, as where Φ _i_ ( _F_ ) is country _i_ 's relative abundance of factor _F_ , and _Xi,W_<sup>_h_arethetotalexportshares</sup> described above. Three measures of factor intensity are built using this procedure, capturing skilled labor intensity, capital intensity, and resource intensity. Following Romalis (2004), I also use GDP per capita as a measure of overall factor abundance. Also following Romalis (2004), the country level factor abundances Φ _i_ ( _F_ ) are taken from Hall and Jones (1999) and from the World Bank (2008) but instead of expressing factor intensities relative to the US, they are expressed relative to the world average. The reason is that while Romalis (2004) tries to explain bilateral exports to the US, this paper focuses on a country's trade with the rest of the world. Notice that, when applied to the output per capita of dierent countries instead of their factor endowments, this measure

> 6Romalis (2004) measures factor intensity directly from US Census of Manufactures (1992), but this would seriously constrain the set of goods that can be considered.

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