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Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries

  • Vlachos, Jonas

    ()

    (Dept. of Economics, Stockholm School of Economics)

  • Svaleryd, Helena

    (Department of Economics)

Due to underlying technological differences, industries differ in their need for external finance. Since the services provided by the financial sector are largely immobile across countries, the pattern of specialization should be influenced by the degree of financial development. We find that this effect is strong: The financial sector has an even greater impact on the pattern of specialization among OECD countries than do differences in human- and physical capital. Further, it gives rise to comparative advantage in a way consistent with the Hecksher-Ohlin-Vanek model. Results on which aspects of financial systems that matter for specialization are also presented.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 449.

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Length: 39 pages
Date of creation: 30 May 2001
Date of revision: 03 Sep 2001
Handle: RePEc:hhs:hastef:0449
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