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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
Contact details of provider: Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
Web page: http://www.essec.edu/
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  1. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
  2. Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations," RCER Working Papers 473, University of Rochester - Center for Economic Research (RCER).
  3. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and development," LSE Research Online Documents on Economics 3743, London School of Economics and Political Science, LSE Library.
  4. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
  5. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January.
  6. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.
  7. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc.
  8. 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.
  9. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
  10. 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.
  11. Daniel Trefler & Susan Chun Zhu, 2005. "The Structure of Factor Content Predictions," NBER Working Papers 11221, National Bureau of Economic Research, Inc.
  12. Peter K. Schott, 2001. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," NBER Working Papers 8244, National Bureau of Economic Research, Inc.
  13. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  14. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
  15. Alejandro Cunat & Marco Maffezzoli, 2004. "Neoclassical Growth and Commodity Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 707-736, July.
  16. Deardorff, Alan V., 1994. "The possibility of factor price equalization, revisited," Journal of International Economics, Elsevier, vol. 36(1-2), pages 167-175, February.
  17. Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
  18. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September.
  19. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  20. Stephen Redding, 2002. "Specialization dynamics," LSE Research Online Documents on Economics 210, London School of Economics and Political Science, LSE Library.
  21. Doireann Fitzgerald & Juan Carlos Hallak, 2004. "Specialization, Factor Accumulation and Development," NBER Working Papers 10638, National Bureau of Economic Research, Inc.
  22. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  23. Ulrich R. Kohli, 1978. "A Gross National Product Function and the Derived Demand for Imports and Supply of Exports," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 167-82, May.
  24. Alan V. Deardorff, 1974. "A Geometry of Growth and Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 7(2), pages 295-306, May.
  25. Peter Debaere & Ufuk Demiroglu, 2006. "Factor Accumulation without Diminishing Returns: the Case of East Asia," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 16-29, 02.
  26. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  27. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  28. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
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