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Reconsidering the Role of Capital Accumulation for International Specialization across Industries

  • Shuichiro Nishioka

    (Department of Economics, West Virginia University)

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    The Heckscher-Ohlin-Vanek (HOV) model allows us to analyze whether countries specialize in particular subsets of industries as they accumulate production factors. Davis and Weinstein (2001) provided evidence that global data supports the HOV model when production techniques are modified to reflect countries’ capital abundances. However, once factor trades are measured bilaterally from the producer countries’ techniques, the HOV prediction can be supported without specialization. This paper examines the relative importance of specialization and technical differences. While I find that developed and developing countries employ different techniques, capital accumulation does not cause a shift in the domestic production mix towards more capital-intensive one. The international mobility in capital appears to be crucial to understand why it is difficult to provide evidence for capital-driven specialization.

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    File URL: http://www.be.wvu.edu/phd_economics/pdf/09-13.pdf
    File Function: First version, 2009
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    Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 09-13.

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    Length: 31 pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:wvu:wpaper:09-13
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    Web page: http://www.be.wvu.edu/phd_economics/
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    1. 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.
    2. Yong_Seok Choi & Pravin Krishna, 2000. "The Factor Content of Bilateral Trade:an Empirical Test," Working Papers 2000-11, Brown University, Department of Economics.
    3. Maskus, Keith E., 1985. "A test of the Heckscher-Ohlin-Vanek theorem: The Leontief commonplace," Journal of International Economics, Elsevier, vol. 19(3-4), pages 201-212, November.
    4. Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    6. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September.
    7. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
    8. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
    9. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    10. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
    11. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
    12. Bernhofen, Daniel M., 2009. "Multiple cones, factor price differences and the factor content of trade," Journal of International Economics, Elsevier, vol. 79(2), pages 266-271, November.
    13. 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.
    14. 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.
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