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Productivity Differences in an Interdependent World

  • Fadinger, Harald

This paper studies cross country differences in productivity from an open economy perspective by using a Helpman-Krugman-Heckscher-Ohlin model. This allows to combine tools from development accounting and the trade literature. When simultaneously fitting data on income, factor prices and the factor content of trade, I find that rich countries have far higher productivities of human capital than poor ones, while differences in physical capital productivity are not systematically related to income per worker. I estimate an aggregate elasticity of substitution between human and physical capital that is significantly below one, clearly rejecting a world that consists of a collection of Cobb-Douglas economies and also one where Heckscher-Ohlin trade is important.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7603.

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Date of creation: Mar 2008
Date of revision:
Handle: RePEc:pra:mprapa:7603
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  1. Jaume Ventura, 2005. "A global view of economic growth," Economics Working Papers 849, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Keith E. Maskus & Shuichiro Nishioka, 2008. "Development-Related Biases in Factor Productivities and the HOV Model of Trade," CESifo Working Paper Series 2253, CESifo Group Munich.
  3. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
  4. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  5. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
  6. 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.
  7. Antràs Pol, 2004. "Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, April.
  8. 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.
  9. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  10. Francesco Caselli, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
  11. Daniel Trefler & Susan Chun Zhu, 2005. "The Structure of Factor Content Predictions," NBER Working Papers 11221, National Bureau of Economic Research, Inc.
  12. Daniel S. Hamermesh, 1984. "The Demand for Labor in the Long Run," NBER Working Papers 1297, National Bureau of Economic Research, Inc.
  13. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  14. repec:clu:wpaper:0102-01 is not listed on IDEAS
  15. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," FRB Atlanta Working Paper 2004-17, Federal Reserve Bank of Atlanta.
  16. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  17. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
  18. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  19. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  20. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  21. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc.
  22. repec:tpr:qjecon:v:114:y:1999:i:1:p:83-116 is not listed on IDEAS
  23. Jaume Ventura, 2005. "A Global View of Economic Growth," Working Papers 203, Barcelona Graduate School of Economics.
  24. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
  25. Francesco Caselli & James Feyrer, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 535-568.
  26. King, Robert G. & Levine, Ross, 1994. "Capital fundamentalism, economic development, and economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 259-292, June.
  27. 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.
  28. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  29. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  30. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  31. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  32. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
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