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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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File URL: https://mpra.ub.uni-muenchen.de/7603/1/MPRA_paper_7603.pdf
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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
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Handle: RePEc:pra:mprapa:7603
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  1. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
  2. 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.
  3. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  4. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  5. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc.
  6. Daniel Trefler & Susan Chun Zhu, 2005. "The Structure of Factor Content Predictions," NBER Working Papers 11221, National Bureau of Economic Research, Inc.
  7. Davis, D.R. & Weinstein, D.E., 1999. "An Account of Global Factor Trade," Working Papers 435, Research Seminar in International Economics, University of Michigan.
  8. Hamermesh, Daniel S., 1987. "The demand for labor in the long run," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 8, pages 429-471 Elsevier.
  9. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  10. 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.
  11. Jaume Ventura, 2005. "A Global View of Economic Growth," NBER Working Papers 11296, National Bureau of Economic Research, Inc.
  12. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, 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. 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.
  15. Scott L. Baier & Gerald P. Dwyer, Jr. & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," FRB Atlanta Working Paper No. 2004-17, Federal Reserve Bank of Atlanta.
  16. Donald R. Davis & David E. Weinstein, 2002. "The factor content of trade," Discussion Papers 0102-01, Columbia University, Department of Economics.
  17. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  18. 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.
  19. Jaume Ventura, 2005. "A Global View of Economic Growth," Working Papers 203, Barcelona Graduate School of Economics.
  20. 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.
  21. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  22. 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, MIT Press, vol. 114(1), pages 83-116, February.
  23. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  24. 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.
  25. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
  26. 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.
  27. 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.
  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. 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.
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