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Specialization, Factor Accumulation and Development

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  • Doireann Fitzgerald

    (Harvard University)

  • Juan Carlos Hallak

    (Harvard University)

Abstract

The Heckscher-Ohlin theory links specialization of production to relative factor endowments. Endowments are the result of accumulation in response to economic in-centives. Taking this into account allows us to reconcile wildly di¤erent predictions in the empirical literature about the e¤ect of capital accumulation on manufacturing output. We estimate the e¤ect of factor proportions on specialization in a cross-section of OECD countries. We show that using the estimation results alone, we cannot dis-tinguish between specialization driven by factor proportions, and specialization that is correlated with factor proportions for other reasons. But our results are consistent with evidence on sectoral factor intensities, which supports the H-O theory. Moreover, our model does a good job of predicting the substantial reallocation that takes place within manufacturing as countries grow. It explains 2/3 of the observed di¤erence in the pattern of specialization between the poorest and richest OECD countries.

Suggested Citation

  • Doireann Fitzgerald & Juan Carlos Hallak, 2002. "Specialization, Factor Accumulation and Development," Working Papers 488, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:488
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
    2. Lo Turco, Alessia & Maggioni, Daniela & Picchio, Matteo, 2013. "Offshoring and job stability: Evidence from Italian manufacturing," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 27-46.
    3. Raddatz, Claudio, 2011. "Over the hedge : exchange rate volatility, commodity price correlations, and the structure of trade," Policy Research Working Paper Series 5590, The World Bank.
    4. Keith E. Maskus & Shuichiro Nishioka, 2009. "Development-related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 519-553, May.
    5. Che, Natasha Xingyuan, 2010. "Factor Endowment, Structural Change, and Economic Growth," MPRA Paper 22352, University Library of Munich, Germany.
    6. Antonio Ciccone & Elias Papaioannou, 2009. "Human Capital, the Structure of Production, and Growth," The Review of Economics and Statistics, MIT Press, pages 66-82.
    7. Morrow, Peter M., 2010. "Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence," Journal of International Economics, Elsevier, pages 137-151.
    8. Batista Cátia & Potin Jacques, 2015. "International specialization and the return to capital," The B.E. Journal of Macroeconomics, De Gruyter, pages 467-508.
    9. Sebastian Benz & Mario Larch & Markus Zimmer, 2014. "The structure of the German economy," Applied Economics, Taylor & Francis Journals, vol. 46(27), pages 3274-3283, September.
    10. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School.
    11. Sebastian Benz & Mario Larch & Markus Zimmer, 2014. "The Structure of Europe: International Input–Output Analysis with Trade in Intermediate Inputs and Capital Flows," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 461-474, August.
    12. Christian Volpe Martincus & Antoni Estevadeordal, 2009. "Trade Policy and Specialization," IDB Publications (Working Papers) 9289, Inter-American Development Bank.
    13. Natasha X Che, 2012. "Factor Endowment, Structural Coherence, and Economic Growth," IMF Working Papers 12/165, International Monetary Fund.
    14. Peter M. Morrow, 2008. "East is East and West is West: A Ricardian-Heckscher-Ohlin Model of Comparative Advantage," Working Papers 575, Research Seminar in International Economics, University of Michigan.
    15. Cusolito , Ana P. & Lederman, Daniel, 2009. "Technology adoption and factor proportions in open economies : theory and evidence from the global computer industry," Policy Research Working Paper Series 5043, The World Bank.
    16. Ioannis Bournakis & Michela Vecchi & Francesco Venturini, 2011. "Offshoring and Specialisation: Are Industries Moving Abroad?," Quaderni del Dipartimento di Economia, Finanza e Statistica 98/2011, Università di Perugia, Dipartimento Economia.

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    JEL classification:

    • F1 - International Economics - - Trade
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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