Endowments, Specialization, and Policy
The paper explores the relationship between industry shares in production and their determinants including factor endowments, technology, and government policies, in a GDP-function framework. We use a new international panel dataset on production and trade compiled by the World Bank. As an intermediate step we calculate Hicks-neutral productivity indices that vary across industries, time, and countries. We find that own-TFP is robustly associated with industry shares across time and countries and that, after correcting for these productivity differences, output shares are related to factor endowments (Rybczynski effects) in a plausible way. Once Rybczynski effects are controlled for, we find little evidence of demand-side policies (import tariffs) affecting the allocation of resources; we find, however, more role for supply-side policies as the relative size of capital-intensive industries is positively associated with infrastructure-capital endowments. Copyright © 2010 Blackwell Publishing Ltd.
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Volume (Year): 18 (2010)
Issue (Month): 5 (November)
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