Advanced Search
MyIDEAS: Login to save this paper or follow this series

International Specialization and the Return to Capital

Contents:

Author Info

  • Catia Batista

    ()
    (Department of Economics and Institute for International Integration Studies, Trinity College Dublin)

  • Jacques Potin

    ()
    (ESSEC Paris)

Abstract

How does factor accumulation affect the pattern of international specialization and returns to capital? We provide a new integrated treatment to this question using a panel of 44 developing and developed countries over the period 1976-2000. We confirm the Heckscher-Ohlin prediction that, with sufficient differences in country endowments, there is no factor price equalization and countries specialize in different subsets of goods. Innovatively, we obtain the returns to capital implied by this model: these are consistent with the Lucas paradox, which we explain after accounting for cross-country differences in the cost of capital goods. We also find that, along their development path, countries have often experienced structural change in the form of intra-industry specialization. Our findings are consistent with Ventura’s hypothesis that growth can be promoted in this way through “beating the curse of diminishing returns” — indeed we find no decrease in the return to capital at any given capital-labor ratio despite capital accumulation by most countries within a cone of diversification.

Download Info

If 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.
File URL: http://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp312.pdf
Download Restriction: no

Bibliographic Info

Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp312.

as in new window
Length: 58 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:iis:dispap:iiisdp312

Contact details of provider:
Postal: 01
Phone: 00 353 1 896 3888
Fax: 00 353 1 896 3939
Web page: http://www.tcd.ie/iiis/
More information through EDIRC

Related research

Keywords: Economic Growth and International Trade; Heckscher-Ohlin; Multiple Cones of Diversification; Marginal Product of Capital; Return to Capital; Lucas paradox; Specialization;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
  2. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
  3. Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers 5203, C.E.P.R. Discussion Papers.
  4. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
  5. Miklós Koren & Silvana Tenreyro, 2007. "Volatility and Development," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 243-287, 02.
  6. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the best fit: exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," LSE Research Online Documents on Economics 20028, London School of Economics and Political Science, LSE Library.
  7. Alan V. Deardorff, 1974. "A Geometry of Growth and Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 7(2), pages 295-306, May.
  8. Jonathan Eaton & Samuel Kortum, 2001. "Trade in Capital Goods," NBER Working Papers 8070, National Bureau of Economic Research, Inc.
  9. Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations," RCER Working Papers 473, University of Rochester - Center for Economic Research (RCER).
  10. Stephen Redding, 2002. "Specialization dynamics," LSE Research Online Documents on Economics 210, London School of Economics and Political Science, LSE Library.
  11. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  12. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  13. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September.
  14. Doireann Fitzgerald & Juan Carlos Hallak, 2004. "Specialization, Factor Accumulation and Development," NBER Working Papers 10638, National Bureau of Economic Research, Inc.
  15. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
  16. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  17. Jeffrey R. Bernstein & David E. Weinstein, 1998. "Do Endowments Predict the Location of Production? Evidence from National and International Data," NBER Working Papers 6815, National Bureau of Economic Research, Inc.
  18. Peter Debaere & Ufuk Demiroglu, 2006. "Factor Accumulation without Diminishing Returns: the Case of East Asia," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 16-29, 02.
  19. Harrigan, James, 1995. "Factor endowments and the international location of production: Econometric evidence for the OECD, 1970-1985," Journal of International Economics, Elsevier, vol. 39(1-2), pages 123-141, August.
  20. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc.
  21. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
  22. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  23. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  24. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  25. Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.
  26. Ulrich R. Kohli, 1978. "A Gross National Product Function and the Derived Demand for Imports and Supply of Exports," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 167-82, May.
  27. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  28. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iis:dispap:iiisdp312. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Colette Keleher).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.