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Productivity Differences in an Interdependent World

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  • Fadinger, Harald

Abstract

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.

Suggested Citation

  • Fadinger, Harald, 2008. "Productivity Differences in an Interdependent World," MPRA Paper 7603, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7603
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    Cited by:

    1. Gino Gancia & Andreas Müller & Fabrizio Zilibotti, 2010. "Structural Development Accounting," Working Papers 494, Barcelona Graduate School of Economics.
    2. Jaume Ventura, 2012. "Comment on "How Do Laffer Curves Differ Across Countries?"," NBER Chapters,in: Fiscal Policy after the Financial Crisis, pages 249-253 National Bureau of Economic Research, Inc.
    3. Nishioka, Shuichiro, 2012. "International differences in production techniques: Implications for the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 98-104.
    4. Marshall, Kathryn G., 2012. "International productivity and factor price comparisons," Journal of International Economics, Elsevier, vol. 87(2), pages 386-390.
    5. Nishioka, Shuichiro, 2013. "R&D, trade in intermediate inputs, and the comparative advantage of advanced countries," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 96-110.

    More about this item

    Keywords

    Heckscher-Ohlin; Productivity Differences; Development Accounting; Open Economy Growth;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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