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Capital, technology, and specialization in the neoclassical model

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  • Shikher, Serge

Abstract

The paper studies the effects of technology and capital stock on trade using simulation. For this purpose, the paper develops and evaluates a model that is distinguished by its use of the Eaton-Kortum framework to explain intra-industry trade instead of the usual Armington assumption. It is found that the magnitudes and in many cases signs of the effects of capital stock and technology on specialization are very country-specific. This implies that the regression studies that estimate cross-country average effects have limited value. Looking at the volume of trade, the paper finds that capital endowments and industry-level comparative advantages have little effect on the volume of trade -- the reduced inter-industry trade between more similar countries is compensated by increased intra-industry trade. Producer heterogeneity, on the other hand, has a significant effect on the volume of trade. The paper evaluates the accuracy of the model's forecasts by performing historical simulations for 1975-95, with the results showing that the model's predictions are accurate.

Suggested Citation

  • Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  • Handle: RePEc:eee:inecon:v:83:y:2011:i:2:p:229-242
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    References listed on IDEAS

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    Cited by:

    1. Harris, Richard G. & Robertson, Peter E., 2013. "Trade, wages and skill accumulation in the emerging giants," Journal of International Economics, Elsevier, vol. 89(2), pages 407-421.
    2. Andrei A Levchenko & Jing Zhang, 2013. "The Global Labor Market Impact of Emerging Giants: A Quantitative Assessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 479-519, August.
    3. Antti SIMOLA & Jouko KINNUNEN & Hannu TÖRMÄ & Jukka KOLA, "undated". "Bioenergy Production in Finland and its Effects on Regional Growth and Employment," EcoMod2010 259600157, EcoMod.
    4. Levchenko, Andrei A. & Zhang, Jing, 2016. "The evolution of comparative advantage: Measurement and welfare implications," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 96-111.
    5. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
    6. Levchenko, Andrei A. & Zhang, Jing, 2014. "The Evolution of Comparative Advantage: Measurement and Implications," Working Paper Series WP-2014-12, Federal Reserve Bank of Chicago.
    7. Levchenko, Andrei A. & Zhang, Jing, 2014. "Ricardian productivity differences and the gains from trade," European Economic Review, Elsevier, vol. 65(C), pages 45-65.
    8. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, vol. 106(11), pages 3401-3438, November.
    9. Virginia Di Nino & Barry Eichengreen & Massimo Sbracia, 2011. "Real Exchange Rates, Trade, and Growth: Italy 1861-2011," Quaderni di storia economica (Economic History Working Papers) 10, Bank of Italy, Economic Research and International Relations Area.
    10. Pierre-Daniel G. Sarte & Esteban Rossi-Hansberg & Fernando Parro & Lorenzo Caliendo, 2013. "The impact of regional and sectoral productivity changes on the U.S. economy," Working Paper 13-14, Federal Reserve Bank of Richmond.
    11. Liuchun Deng, 2016. "Specialization Dynamics, Convergence, and Idea Flows," SERIES 09-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Nov 2016.
    12. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 1-44.
    13. Andrei Levchenko & Jing Zhang, 2014. "External rebalancing, structural adjustment, and real exchange rates in developing Asia," Chapters,in: Asia and Global Production Networks, chapter 7, pages 215-248 Edward Elgar Publishing.
    14. repec:mie:wpaper:6237 is not listed on IDEAS

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