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Development Accounting in a Heckscher-Ohlin World

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  • Harald Fadinger

    (Department of Economics and Business, Universitat Pompeu Fabra)

Abstract

What are the reasons for cross country differences in income per worker? Are they caused by differential factor endowments or by cross country variation in productivity? If productivity matters, what form do productivity differences have? In this paper I address these questions from an open economy perspective using tools from development accounting. I show that trade changes the relationship between factors, productivities and income in a crucial way. In addition, I simultaneously fit income and trade data, which enables me to evaluate the quality of my productivity calibrations. The model best supported by trade data has factor specific productivities and complementarities between human and physical capital. Rich countries use physical capital more efficiently than poor countries, while medium income countries employ human capital in the most productive way.

Suggested Citation

  • Harald Fadinger, 2007. "Development Accounting in a Heckscher-Ohlin World," 2007 Meeting Papers 600, Society for Economic Dynamics.
  • Handle: RePEc:red:sed007:600
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    File URL: https://economicdynamics.org/meetpapers/2007/paper_600.pdf
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    References listed on IDEAS

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    1. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    2. Demiroglu, Ufuk & Koo Yun, Kwan, 1999. "The lens condition for factor price equalization," Journal of International Economics, Elsevier, vol. 47(2), pages 449-456, April.
    3. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 613-646.
    4. Ben S. Bernanke & Kenneth S. Rogoff (ed.), 2001. "NBER Macroeconomics Annual 2000," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262523140, January.
    5. 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.
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