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Directed Technical Change and International Trade

  • DUDLEY, Leonard
  • MOENIUS, Johannes

Recent changes in comparative advantage in the largest OECD economies differ significantly from the predictions of Heckscher-Ohlin-Vanek theory. Japan's rising share of OECD machinery exports and the improvement in the comparative advantage of the USA and Germany in heavy industry were accompanied by growing scarcities of the factors used intensively in the favored sector of each country. Here we examine Acemoglu's (1998, 2002) hypothesis that technical change may be directed toward raising the marginal productivity of abundant factors. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that international comparative advantage was reshaped by innovation biased toward the abundant factors in the largest economies.

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File URL: http://hdl.handle.net/1866/507
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2003-18.

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Length: 35 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mtl:montde:2003-18
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  1. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
  2. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  3. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
  4. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc.
  5. Redding, Stephen, 2002. "Specialization dynamics," Journal of International Economics, Elsevier, vol. 58(2), pages 299-334, December.
  6. Helpman, E., 1998. "The Structure of Foreign Trade," Papers 18-98, Tel Aviv.
  7. James Harrigan & Egon Zakrajsek, 2000. "Factor supplies and specialization in the world economy," Staff Reports 107, Federal Reserve Bank of New York.
  8. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November.
  9. Donald R. Davis & David E. Weinstein, 2002. "Do factor endowments matter for north-north trade?," Discussion Papers 0102-03, Columbia University, Department of Economics.
  10. J. David Richardson & Chi Zhang, 1999. "Revealing Comparative Advantage: Chaotic or Coherent Patterns Across Time and Sector and U.S. Trading Partner?," NBER Working Papers 7212, National Bureau of Economic Research, Inc.
  11. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  12. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
  13. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
  14. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  15. Aoki, Masahiko, 1986. "Horizontal vs. Vertical Information Structure of the Firm," American Economic Review, American Economic Association, vol. 76(5), pages 971-83, December.
  16. Ranis, Gustav, 1973. "Industrial Sector Labor Absorption," Economic Development and Cultural Change, University of Chicago Press, vol. 21(3), pages 387-408, April.
  17. Balassa, Bela, 1979. "The Changing Pattern of Comparative Advantage in Manufactured Goods," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 259-66, May.
  18. 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 421-46, June.
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