Do Labor Market Institutions Affect International Comparative Advantage? An Empirical Investigation
AbstractThe aim of this paper is to explore the different determinants of international comparative advantage. Starting from a theoretically well founded neoclassical framework, where specialization depends on relative factor endowments and technological differences, we study the role of the institutional diversity in the labor market. We use an international trade model where endogenous effort is included in an otherwise standard production function. Since the effort level can be affected by country-specific labor institutions, the institutional context may in turn be able to influence the international comparative advantage. After illustrating the theoretical motivations for such an effect, we implement a rigorous econometric analysis on a group of OECD countries to test its empirical validity. We obtain that institutions have an important role in explaining the relative economic performance of a number of manufacturing sectors. In particular, stronger labor market institutions are found to advantage capital-intensive sectors and disadvantage labor-intensive ones. Policy implications are derived and discussed
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Bibliographic InfoPaper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 444.
Date of creation: Dec 2004
Date of revision:
Comparative Advantage; Labor Market Institutions; International Specialization;
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F10 - International Economics - - Trade - - - General
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
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- William Milberg & Deborah Winkler, 2009. "Globalization, Offshoring and Economic Insecurity in Industrialized Countries," Working Papers 87, United Nations, Department of Economics and Social Affairs.
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