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Financial Markets, Industrial Specialization and Comparative Advantage - Evidence from OECD Countries

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  • Svaleryd, Helena

    (Dept. of Economics, Stockholm University)

  • Vlachos, Jonas

    ()
    (Department of Economics, Stockholm School of Economics)

Abstract

Due to underlying technological and organizational differences, industries differ in their need for external finance. Since services provided by the financial sector are largely immobile across countries, the pattern of industrial specialization should be influenced by the degree of financial development. We find this effect to be strong. In fact, the financial sector has greater impact on industrial specialization among OECD countries than differences in human and physical capital. We also show that the causality indeed run from the financial sector to specialization. Further, financial sectors are a source of comparative advantage in a way consistent with the Hecksher-Ohlin-Vanek model. Results on which aspects of financial systems that are of importance for specialization and comparative advantage are also presented.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2002:6.

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Length: 43 pages
Date of creation: 13 Jun 2002
Date of revision:
Handle: RePEc:hhs:sunrpe:2002_0006

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Fax: +46 8 16 14 25
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Web page: http://www.ne.su.se/
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Keywords: Financial intermediation; Financial systems; Specialization patterns; Financial intermediation; Financial systems; Specialization patterns; Comparative advantage;

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Cited by:
  1. Miklós Koren, 2003. "Financial Globalization, Portfolio Diversification, and the Pattern of International Trade," IMF Working Papers 03/233, International Monetary Fund.
  2. Borja Larrain, 2005. "The stock market and cross country differences in relative prices," Working Papers 05-6, Federal Reserve Bank of Boston.

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