If one is trying to make industry by industry predictions, HO models will be misspecied if they omit TFP dierences even if TFP is uncorrelated with...

If one is trying to make industry by industry predictions, HO models will be misspecied if they omit TFP dierences even if TFP is uncorrelated with factor intensity. However, if one is trying to identify coecients such as those that occur in Rybczynski regressions, this will be a valid exercise if TFP is uncorrelated with factor intensity but not if TFP is correlated with factor intensity. Although I nd that TFP is uncorrelated with factor intensity in my sample, the obvious caveat applies that such a (zero) correlation is ultimately an empirical question that depends on the data set. [1] Acemoglu, Daron, (1998) Why do New Technologies Complement Skills?