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Capital, technology, and specialization in the neoclassical model

  • Shikher, Serge

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.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 83 (2011)
Issue (Month): 2 (March)
Pages: 229-242

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Handle: RePEc:eee:inecon:v:83:y:2011:i:2:p:229-242
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  2. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
  3. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2008. "An Anatomy of International Trade: Evidence from French Firms," NBER Working Papers 14610, National Bureau of Economic Research, Inc.
  4. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
  5. Arnaud Costinot & Ivana Komunjer, 2007. "What Goods Do Countries Trade? New Ricardian Predictions," NBER Working Papers 13691, National Bureau of Economic Research, Inc.
  6. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  7. James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
  8. Finicelli, Andrea & Pagano, Patrizio & Sbracia, Massimo, 2009. "Trade-revealed TFP," MPRA Paper 16951, University Library of Munich, Germany.
  9. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
  10. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  11. 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.
  12. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  13. Ethier, Wilfred J., 1982. "The general role of factor intensity in the theorems of international trade," Economics Letters, Elsevier, vol. 10(3-4), pages 337-342.
  14. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  15. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
  16. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage : A Quantitative Approach," Macroeconomics Working Papers 22071, East Asian Bureau of Economic Research.
  17. Edward E. Leamer & James Levinsohn, 1994. "International Trade Theory: The Evidence," NBER Working Papers 4940, National Bureau of Economic Research, Inc.
  18. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
  19. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers 6558, National Bureau of Economic Research, Inc.
  20. Robert C. Feenstra & Robert E. Lipsey & Harry P. Bowen, 1997. "World Trade Flows, 1970-1992, with Production and Tariff Data," NBER Working Papers 5910, National Bureau of Economic Research, Inc.
  21. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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