The Empirical Investigation of The Kemp-Jones Model: The Case of OECD Countries
This paper analyzes the impact of different production technologies on relative prices of various goods and through them on the pattern of trade in these goods. Perfect capital mobility and differences in technology across countries are assumed, consistent with the Kemp-Jones model. This allows one to focus on labor costs, rather than on both labor and capital costs. The sector-specific unit labor costs for each country (relative to those of other sectors within each country) determine the comparative advantage or disadvantage of each country in trade. These sector- and country-specific relative unit labor costs can be broken down into two components, (i) relative wage rates and (ii) relative labor requirements per unit of output. The latter can be further decomposed into two sub-components, (iii) relative capital requirements per unit of labor and (iv) relative rates of technical progress. The decomposition into these two sub-components is carried out by an econometric estimation of the translog production function for each of 10 traded good sectors (2-digit classification of International Sectoral Data Base, 1970-92) in 14 OECD countries, using 3SLS estimation method. The decomposition of country- and sector-specific unit labor costs results in various empirical findings; two of which are as follows. First, the Ricardian model claims that the relative labor requirements are the key determinant of comparative advantage. The empirical evidence could only confirm this claim for the 1970s. Second, one of the main sources of the poor performance of the Heckscher-Ohlin theorem is widely agreed to be in cross-country differences in relative labor requirements. The decomposition of relative labor requirements into two sub-components indicates that such differences are highly correlated with cross-country differences in relative rates of technical progress in the light industries, but with cross-country differences in relative capital requirements in the heavy industries.
|Date of creation:||01 Aug 2000|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987.
"Multicountry, Multifactor Tests of the Factor Abundance Theory,"
American Economic Review,
American Economic Association, vol. 77(5), pages 791-809, December.
- Harry P. Bowen & Edward E. Leamer & Leo Sveikauskas, 1986. "Multicountry, Multifactor Tests of the Factor Abundance Theory," NBER Working Papers 1918, National Bureau of Economic Research, Inc.
- Keith E. Maskus & Allan Webster, 1995. "Factor Specialization in U.S. and U.K. Trade: Simple Departures from the Factor-content Theory," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 131(III), pages 419-439, September.
- Joseph E. Gagnon and Andrew K. Rose., 1991. "How Pervasive Is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows," Economics Working Papers 91-186, University of California at Berkeley.
- Gagnon, Joseph E. & Rose, Andrew K., 1991. "How Pervasive Is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows," Department of Economics, Working Paper Series qt5g98559s, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Joseph E. Gagnon & Andrew K. Rose, 1992. "How Pervasive is the Product Cycle? The Empirical Dynamics of American and Japanese Trade Flows," NBER Working Papers 3946, National Bureau of Economic Research, Inc.
- Joseph E. Gagnon & Andrew K. Rose, 1991. "How pervasive is the product cycle? The empirical dynamics of American and Japanese trade flows," International Finance Discussion Papers 410, Board of Governors of the Federal Reserve System (U.S.).
- Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-446, June.
- Durkin, John T, Jr & Krygier, Markus, 1998. "Comparative Advantage and the Pattern of Trade within Industries," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 292-306, May.
- Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
- Hayami, Yujiro & Ruttan, Vernon W, 1970. "Agricultural Productivity Differences Among Countries," American Economic Review, American Economic Association, vol. 60(5), pages 895-911, December.
- Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
- Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1159. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.