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Factor-Biased Technical Change and Specialization Patterns

  • Jana Brandt

    (University of Giessen)

  • Jürgen Meckl

    (University of Giessen)

  • Ivan Savin

    ()

    (University of Giessen)

We analyze the medium- and long-run effects of international integration of capital markets on specialization patterns of countries. For that purpose, we incorporate induced technical change into a Heckscher-Ohlin model with a continuum of final goods. This provides a comprehensive theory that explains the dynamics of comparative advantages based on differences in effective factor endowments. Our model constitutes an appropriate framework for understanding the changes in industrial structure of foreign trade observed, e.g., in the CEE countries over the last two decades. In addition, our approach provides a theoretical foundation for the empirical prospective comparative advantage index (Savin and Winker 2009) with new insights into the future dynamics of comparative advantages. Eventually, the model may serve as a basis to set development priorities in countries being in the period of transition.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/18-2011_savin.pdf
File Function: First version, 2011
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201118.

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Length: 31pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201118
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