The Empirical Investigation of The Kemp-Jones Model: The Case of OECD Countries
AbstractThis paper analyzes the impact of different production technologies on relative prices of various goods and through them on the pattern of trade in these goods. Perfect capital mobility and differences in technology across countries are assumed, consistent with the Kemp-Jones model. This allows one to focus on labor costs, rather than on both labor and capital costs. The sector-specific unit labor costs for each country (relative to those of other sectors within each country) determine the comparative advantage or disadvantage of each country in trade. These sector- and country-specific relative unit labor costs can be broken down into two components, (i) relative wage rates and (ii) relative labor requirements per unit of output. The latter can be further decomposed into two sub-components, (iii) relative capital requirements per unit of labor and (iv) relative rates of technical progress. The decomposition into these two sub-components is carried out by an econometric estimation of the translog production function for each of 10 traded good sectors (2-digit classification of International Sectoral Data Base, 1970-92) in 14 OECD countries, using 3SLS estimation method. The decomposition of country- and sector-specific unit labor costs results in various empirical findings; two of which are as follows. First, the Ricardian model claims that the relative labor requirements are the key determinant of comparative advantage. The empirical evidence could only confirm this claim for the 1970s. Second, one of the main sources of the poor performance of the Heckscher-Ohlin theorem is widely agreed to be in cross-country differences in relative labor requirements. The decomposition of relative labor requirements into two sub-components indicates that such differences are highly correlated with cross-country differences in relative rates of technical progress in the light industries, but with cross-country differences in relative capital requirements in the heavy industries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1159.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
- Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
- Durkin, John T, Jr & Krygier, Markus, 1998. "Comparative Advantage and the Pattern of Trade within Industries," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 292-306, May.
- Hayami, Yujiro & Ruttan, Vernon W, 1970. "Agricultural Productivity Differences Among Countries," American Economic Review, American Economic Association, vol. 60(5), pages 895-911, December.
- Keith E. Maskus & Allan Webster, 1995. "Factor Specialization in U.S. and U.K. Trade: Simple Departures from the Factor-content Theory," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(III), pages 419-439, September.
- Gagnon, Joseph E. & Rose, Andrew K., 1991.
"How Pervasive Is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows,"
Department of Economics, Working Paper Series
qt5g98559s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Joseph E. Gagnon and Andrew K. Rose., 1991. "How Pervasive Is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows," Economics Working Papers 91-186, University of California at Berkeley.
- Joseph E. Gagnon & Andrew K. Rose, 1991. "How pervasive is the product cycle? The empirical dynamics of American and Japanese trade flows," International Finance Discussion Papers 410, Board of Governors of the Federal Reserve System (U.S.).
- Joseph E. Gagnon & Andrew K. Rose, 1992. "How Pervasive is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows," NBER Working Papers 3946, National Bureau of Economic Research, Inc.
- Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987.
"Multicountry, Multifactor Tests of the Factor Abundance Theory,"
American Economic Review,
American Economic Association, vol. 77(5), pages 791-809, December.
- Harry P. Bowen & Edward E. Leamer & Leo Sveikauskas, 1986. "Multicountry, Multifactor Tests of the Factor Abundance Theory," NBER Working Papers 1918, National Bureau of Economic Research, Inc.
- Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
- Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.