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Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model

  • Harrigan, James

The neoclassical model of trade predicts that international specialization will be jointly determined by cross-country differences in relative factor endowments and technology levels. This paper specifies an empirical model of specialization consistent with the neoclassical explanation. In the model, a sector's share of GDP depends on relative factor supplies and relative technology differences, and the estimated parameters of the model have a clear connection to theoretical parameters. The model is estimated with panel data on manufacturing sectors in industrialized countries. Relative technology levels and factor supplies are both found to be important determinants of specialization. Copyright 1997 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 87 (1997)
Issue (Month): 4 (September)
Pages: 475-94

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Handle: RePEc:aea:aecrev:v:87:y:1997:i:4:p:475-94
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  1. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  2. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
  3. James Harrigan, 1998. "Estimation of cross-country differences in industry production functions," Staff Reports 36, Federal Reserve Bank of New York.
  4. Staiger, Robert W., 1988. "A specification test of the Heckscher-Ohlin theory," Journal of International Economics, Elsevier, vol. 25(1-2), pages 129-141, August.
  5. Richard Brecher & Eshan Choudhri, 1992. "Some Empirical Support for the Heckscher-Ohlin Model of Production," Carleton Economic Papers 92-08, Carleton University, Department of Economics.
  6. 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.
  7. 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.
  8. Diewert, W. Erwin, 1978. "Hick's Aggregation Theorem and the Existence of a Real Value Added Function," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 2 McMaster University Archive for the History of Economic Thought.
  9. Klepper, Steven & Leamer, Edward E, 1984. "Consistent Sets of Estimates for Regressions with Errors in All Variables," Econometrica, Econometric Society, vol. 52(1), pages 163-83, January.
  10. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
  11. Edward E. Leamer & James Levinsohn, 1994. "International Trade Theory: The Evidence," NBER Working Papers 4940, National Bureau of Economic Research, Inc.
  12. Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-11, December.
  13. James Harrigan, 1997. "Cross-country comparisons of industry total factor productivity: theory and evidence," Research Paper 9734, Federal Reserve Bank of New York.
  14. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
  15. Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier.
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