Further, international trade will still occur between two countries having identical preferences and factor endowments (relying on specialization to create a comparative advantage in the production of differentiated goods between the two nations).
The hypothesis was proposed by economist Staffan Burenstam Linder in 1961[1] as a possible resolution to the Leontief paradox, which questioned the empirical validity of the Heckscher–Ohlin theory (H–O).
In fact, Leontief found that the United States (then the most capital abundant nation) exported primarily labor-intensive goods.
Econometric tests of the hypothesis usually proxy the demand structure in a country from its per capita income: It is convenient to assume that the closer are the income levels per consumer the closer are the consumer preferences.
[2] (That is, the proportionate demand for each good becomes more similar, for example following Engel's law on food and non-food spending.)