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Empirical Tests of Alternative Models of International Growth

In: Trade and Structural Change in Pacific Asia

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  • Laurence J. Kotlikoff
  • Edward E. Leamer

Abstract

Recent changes in patterns of international trade and growth have rekindled interest in the relationships among trade, growth, and the international distribution of income. Three alternative models can serve as a theoretical foundation for an empirical analysis of these relationships. The first is the standard Heckscher-Ohlin-Samuelson (Ho) trade model with equalnumbers of factors and goods and incomplete specialization. The second model allows complete specialization and more goods than factors. The third model posits short run capital immobility. Each of these models has quite different implications for the determination of wage levels and growth rates.The conclusions that we draw from this research are rather mixed. Each of the models perform well on certain criteria and poorly on others. While the standard HO model clearly fails to satisfy certain cross-equation constraints, national endowments are remarkably good predictors of the locus of international production. There are, however, significant nonlinearities in the relationship between factor allocations and national endowments. Such nonlinearities are predicted by the uneven version of the HO model. At odds with both of these models is our finding that lagged values of inputs providean important explanation of current factor demands. Such correlations are suggested by the adjustment cost model.
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Suggested Citation

  • Laurence J. Kotlikoff & Edward E. Leamer, 1987. "Empirical Tests of Alternative Models of International Growth," NBER Chapters,in: Trade and Structural Change in Pacific Asia, pages 227-270 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:6924
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    References listed on IDEAS

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    1. Robert Baldwin, 1984. "Rent-seeking and trade policy: An industry approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(4), pages 662-677, December.
    2. Laurence J. Kotlikoff & Edward E. Leamer & Jeffrey Sachs, 1981. "The International Economics of Transitional Growth: The Case of the United States," NBER Working Papers 0773, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Marcus Noland, 1987. "Newly industrializing countries’ comparative advantage in manufactured goods," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 123(4), pages 679-696, December.
    2. Farhad Rassekh, 1993. "International trade and the relative dispersion of industrial wages and production techniques in 14 OECD countries, 1970–1985," Open Economies Review, Springer, vol. 4(3), pages 325-344, September.

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