Factor Supplies and Specialization in the World Economy
AbstractA core prediction of the Heckscher-Ohlin theory is that countries specialize in goods in which they have a comparative advantage, and that the source of comparative advantage is differences in relative factor supplies. To examine this theory, we use the most extensive dataset available and document the pattern of industrial specialization and factor endowment differences in a broad sample of rich and developing countries over a lengthy period (1970-92). Next, we develop an empirical model of specialization based on factor endowments, allowing for unmeasurable technological differences and estimate it using panel data techniques. In addition to estimating the effects of factor endowments, we also consider the alternative hypothesis that the level of aggregate productivity by itself can explain specialization. Our results clearly show the importance of factor endowments on specialization: relative endowments do matter.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7848.
Date of creation: Aug 2000
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Other versions of this item:
- James Harrigan & Egon Zakrajsek, 2000. "Factor supplies and specialization in the world economy," Finance and Economics Discussion Series 2000-43, Board of Governors of the Federal Reserve System (U.S.).
- James Harrigan & Egon Zakrajsek, 2000. "Factor supplies and specialization in the world economy," Staff Reports 107, Federal Reserve Bank of New York.
- F1 - International Economics - - Trade
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- Baltagi, Badi H. & Li, Qi, 1991. "A transformation that will circumvent the problem of autocorrelation in an error-component model," Journal of Econometrics, Elsevier, vol. 48(3), pages 385-393, June.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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