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Productivity differences in an interdependent world

  • Fadinger, Harald

This paper studies cross-country differences in productivity from an open economy perspective by using a Helpman-Krugman-Heckscher-Ohlin model that embraces the single-cone model and a one-sector economy with factor deepening as particular cases. To estimate the model, I combine tools from development accounting and the factor content of trade literature. When simultaneously fitting data on income, factor prices and the factor content of trade, I find that the one-sector model is by far better supported by the data than the single-cone model. Rich countries have far higher productivities of human capital than poor ones, while differences in physical capital productivity are not related to income per worker. Finally, I estimate an aggregate elasticity of substitution between human and physical capital that is significantly below one.

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

Volume (Year): 84 (2011)
Issue (Month): 2 (July)
Pages: 221-232

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Handle: RePEc:eee:inecon:v:84:y:2011:i:2:p:221-232
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