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Factor Uses and the Pattern of Specialization

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Author Info
Georg Schaur
Chong Xiang
Anya Savikhin

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Abstract

We show that in the setting of multiple goods and factors, the factor proportions theory has the following prediction: across industries, the impacts of the endowment of a given factor on industry outputs have positive co-variance with the relative uses of this factor. The intuition is that, on average, the industries that use a given factor heavily have positive output responses, following an increase in the endowment of this factor. This co-variation condition is robust to Hicks neutral- and factor-augmenting productivity differences, and constitutes a direct test of the production side of the factor proportions theory. We also show that the co-variation condition finds empirical support. This is evidence that is consistent with the factor proportions theory. Copyright © 2008 The Authors.

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2007.00721.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 16 (2008)
Issue (Month): 2 (05)
Pages: 368-382
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Handle: RePEc:bla:reviec:v:16:y:2008:i:2:p:368-382

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