IDEAS home Printed from https://ideas.repec.org/p/deg/conpap/c011_017.html
   My bibliography  Save this paper

Development Accounting in a Heckscher-Ohlin World

Author

Listed:
  • Harald Fadinger

Abstract

This paper tries to contribute to the strand of literature that investigates the question to what extend differences in per capita income between countries are due to differences in factor endowments like human- and physical capital on the one hand and due to differences in technology on the other hand. In particular, I am trying to assess to what extend structural transformation, ie the ability of a country to specialize in the production of goods that intensively use the factors with which it is abundantly endowed, has an important role in determining cross country income differences. I find that when productivities are country specific, for realistic parameter values structural transformation plays little role and productivity differences between countries remain large. However, when I allow for factor augmenting technology differences and factors are complementary in sectoral production, there seem to be large differences in the productivity of physical capital that are strongly correlated with per capita income, while human capital seems to have an inverse hump shape. This result is ad odds with Caselli (2005), who finds that poor countries use capital more efficiently than rich countries, while having a lower productivity of human capital. Finally, I use trade data and the Heckscher-Ohlin-Vanek equations to assess the plausibility of my calibrations and find a good fit for the model with factor specific productivities and complementary factors.

Suggested Citation

  • Harald Fadinger, 2006. "Development Accounting in a Heckscher-Ohlin World," DEGIT Conference Papers c011_017, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c011_017
    as

    Download full text from publisher

    File URL: http://degit.sam.sdu.dk/papers/degit_11/C011_017.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rodolfo E. Manuelli & Ananth Seshadri, 2014. "Human Capital and the Wealth of Nations," American Economic Review, American Economic Association, vol. 104(9), pages 2736-2762, September.
    2. 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.
    3. 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.
    4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
    5. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    6. 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.
    7. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    8. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    9. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    10. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
    11. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    12. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    13. Donald R. Davis & David E. Weinstein, 2001. "The Factor Content of Trade," NBER Working Papers 8637, National Bureau of Economic Research, Inc.
    14. 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, President and Fellows of Harvard College, vol. 114(1), pages 83-116.
    15. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    16. Alan V. Deardorff, 2011. "The possibility of factor price equalization, revisited," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 15, pages 155-163, World Scientific Publishing Co. Pte. Ltd..
    17. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72, National Bureau of Economic Research, Inc.
    18. Peter J. 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.
    19. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fadinger, Harald, 2011. "Productivity differences in an interdependent world," Journal of International Economics, Elsevier, vol. 84(2), pages 221-232, July.
    2. Harald Fadinger, 2007. "Development Accounting in a Heckscher-Ohlin World," 2007 Meeting Papers 600, Society for Economic Dynamics.
    3. Jones, C.I., 2016. "The Facts of Economic Growth," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 3-69, Elsevier.
    4. Decreux, Yvan & Ramos, Maria Priscila, 2007. "How does tariff-rate quota modelling affect CGE results? An application for MIRAGE," Working Papers 7206, TRADEAG - Agricultural Trade Agreements.
    5. Harald Fadinger & Pablo Fleiss, 2011. "Trade and Sectoral Productivity," Economic Journal, Royal Economic Society, vol. 121(555), pages 958-989, September.
    6. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    7. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    8. Daniel Bernhofen, 2010. "The Empirics of General Equilibrium Tade Theory: What Have we Learned?," CESifo Working Paper Series 3242, CESifo.
    9. Benjamin F. Jones, 2014. "The Human Capital Stock: A Generalized Approach," American Economic Review, American Economic Association, vol. 104(11), pages 3752-3777, November.
    10. Marshall, Kathryn G., 2012. "International productivity and factor price comparisons," Journal of International Economics, Elsevier, vol. 87(2), pages 386-390.
    11. Areendam Chanda & Beatrice Farkas, 2009. "Technology-Skill Complementarity and International TFP Differences," DEGIT Conference Papers c014_028, DEGIT, Dynamics, Economic Growth, and International Trade.
    12. Brakman, Steven & van Marrewijk, Charles, 2013. "Lumpy countries, urbanization, and trade," Journal of International Economics, Elsevier, vol. 89(1), pages 252-261.
    13. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    14. Ferreira, Pedro Cavalcanti & Issler, Joao Victor & de Abreu Pessoa, Samuel, 2004. "Testing production functions used in empirical growth studies," Economics Letters, Elsevier, vol. 83(1), pages 29-35, April.
    15. Rui HAO & Zheng WEI, 2009. "Sources Of Income Differences Across Chinese Provinces During The Reform Period: A Development Accounting Exercise," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 1-29, March.
    16. Bryan Graham & Jonathan Temple, 2006. "Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?," Journal of Economic Growth, Springer, vol. 11(1), pages 5-41, March.
    17. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    18. Peter Debaere & Ufuk Demiroglu, 2003. "Factor Accumulation Without Diminishing Returns: The Case of East Asia: Technical Paper 2003-11," Working Papers 15113, Congressional Budget Office.
    19. Erich Gundlach, 2006. "The Solow Model in the Empirics of Cross-Country Growth," DEGIT Conference Papers c011_015, DEGIT, Dynamics, Economic Growth, and International Trade.
    20. Veloso, Fernando A. & Ferreira, Pedro Cavalcanti & Pessôa, Samuel de Abreu, 2004. "The evolution of international output differences (1960-2000): From factors to productivity," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 548, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c011_017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jan Pedersen (email available below). General contact details of provider: https://edirc.repec.org/data/iehhsdk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.