Development accounting exercises based on an aggregate production function find technology is biased in favour of a country's abundant production factors. We provide an explanation to this finding based on the Heckscher-Ohlin model. Countries trade and specialize in the industries that use intensively the production factors they are abundantly endowed with. For given endowment ratios, this implies smaller international differences in factor price ratios than under autarky. Thus, when measuring the factor bias of technology with the same aggregate production function for all countries, they appear to have an abundant-factor bias in their technologies.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6290.
Find related papers by JEL classification: F1 - International Economics - - Trade F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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