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Do Countries Specialize?

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  • Peter K. Schott

    () (School of Management)

Abstract

Do rich and poor countries compete by exporting the same mix of goods to the US? Using highly disaggregate trade flow data ? which breaks US imports into thousands rather than tens of goods ? this paper documents two significant trends. First, the portion of US imports originating in either rich or poor countries exclusively has fallen dramatically as world trade has increased, from 50% in 1972 to 25% in 1994. This heightened export competition among countries with vastly different factor endowments is greatest in manufactures, particularly apparel and textiles, and smallest in natural resources. Second, when rich and poor countries both export a manufactured good to the US, rich countries receive a significantly higher price for their export than poor countries, and this disparity increases with time. To the extent that this heterogeneity maps into product differences, it consistent with the type of specialization implied by both the Heckscher-Ohlin model of trade and Product Cycle theory. On the other hand, significant intra-good price differences are troubling for existing empirical trade research because they suggest that even a very fine categorization of commodities may be too coarse for the assumptions underlying most trade models. We discuss the implications of unaccounted-for product heterogeneity for previous Heckscher-Ohlin estimations as well as its potential relevance for the trade and wages debate.

Suggested Citation

  • Peter K. Schott, 2001. "Do Countries Specialize?," Yale School of Management Working Papers ysm173, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm173
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    Cited by:

    1. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2001. "Factor Price Equality and the Economies of the United States," NBER Working Papers 8068, National Bureau of Economic Research, Inc.
    2. 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.
    3. Tibor Besedes & Thomas J. Prusa, 2004. "Surviving the U.S. Import Market: The Role of Product Differentiation," NBER Working Papers 10319, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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