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International Specialization and the Return to Capital, 1976-2000

Using panel data, we provide an integrated treatment of factor endowments, factor prices, and international specialization. In the various cross sections, we confirm the Heckscher-Ohlin prediction that, with sufficient differences in country endowments, there is no factor Price equalization and countries specialize in different subsets of goods. We also explain why, despite higher returns to capital, poor countries do not attract more capital from rich countries. Moreover, along their development path, countries experience the structural change predicted by theory. We find that these changes in specialization mainly occur within industries. Despite capital accumulation by most countries, we find no decrease in the return to capital at any given capital-labour ratio. This must have facilitated growth through capital accumulation

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Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 08001.

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Length: 50 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:ebg:essewp:dr-08001
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ESSEC Research Center, BP 105, 95021 Cergy, France

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  9. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  10. Deardorff, A.V., 1991. "The Possibility of Factor Price Equalization, Revisited," Working Papers 277, Research Seminar in International Economics, University of Michigan.
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  12. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
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  14. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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  20. Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2001. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization," CEPR Discussion Papers 2944, C.E.P.R. Discussion Papers.
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  27. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-94, September.
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