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A Story of Trade-Induced Industrialization


  • Alan V. Deardorff

    (University of Michigan)

  • Jee-Hyeong Park

    (Seoul National University)


We offer a simple variant of the standard Heckscher-Ohlin Model that explains how a developing country, by opening to trade with a large capital-abundant economy, can be induced to shift resources into more capital-intensive production than what it was producing in autarky. As a result it experiences a rise in its return to capital and, if capital is internationally mobile, both an increase in its capital stock and an increase in trade. These results arise in a model in which both a traditional and a modern sector can produce final goods that are perfect substitutes. The modern sector uses intermediate inputs that differ in their relative capital intensities, while being both more capital intensive than the traditional sector. The results of this model accord well with the experience of the Asian Tiger economies during the early decades of their export-oriented industrialization.

Suggested Citation

  • Alan V. Deardorff & Jee-Hyeong Park, 2010. "A Story of Trade-Induced Industrialization," Working Papers 608, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:608

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    References listed on IDEAS

    1. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers 1769, Harvard - Institute of Economic Research.
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    Cited by:

    1. Marjan Petreski & Branimir Jovanovic & Igor Velickovski, 2017. "Tariff-Induced (De)industrialization: An Empirical Analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 345-381, September.
    2. Branimir Jovanović & Marjan Petreski & Igor Velickovski, 2015. "Tariff-induced (de)industrialization in transition economies: A comparative analysis," wiiw Balkan Observatory Working Papers 116, The Vienna Institute for International Economic Studies, wiiw.
    3. repec:eee:deveco:v:130:y:2018:i:c:p:45-65 is not listed on IDEAS

    More about this item


    Industrialization; Trade; Intermediate Inputs; Heckscher-Ohlin Model; Asian Tiger Economies;

    JEL classification:

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


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