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Specialization, Factor Accumulation and Development

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Author Info
Doireann Fitzgerald (Harvard University)
Juan Carlos Hallak (Harvard University)

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Abstract

The Heckscher-Ohlin theory links specialization of production to relative factor endowments. Endowments are the result of accumulation in response to economic in-centives. Taking this into account allows us to reconcile wildly di¤erent predictions in the empirical literature about the e¤ect of capital accumulation on manufacturing output. We estimate the e¤ect of factor proportions on specialization in a cross-section of OECD countries. We show that using the estimation results alone, we cannot dis-tinguish between specialization driven by factor proportions, and specialization that is correlated with factor proportions for other reasons. But our results are consistent with evidence on sectoral factor intensities, which supports the H-O theory. Moreover, our model does a good job of predicting the substantial reallocation that takes place within manufacturing as countries grow. It explains 2/3 of the observed di¤erence in the pattern of specialization between the poorest and richest OECD countries.

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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 488.

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Length: 48 Pages
Date of creation: 2002
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Handle: RePEc:mie:wpaper:488

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Islam, Nazrul, 1999. "International Comparison of Total Factor Productivity: A Review," Review of Income and Wealth, Blackwell Publishing, vol. 45(4), pages 493-518, December.
  2. 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. [Downloadable!] (restricted)
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. James Harrigan, 2001. "Specialization and the Volume of Trade: Do the Data Obey the Laws?," NBER Working Papers 8675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October. [Downloadable!] (restricted)
  6. Deardorff, Alan V, 1982. "The General Validity of the Heckscher-Ohlin Theorem," American Economic Review, American Economic Association, vol. 72(4), pages 683-94, September. [Downloadable!] (restricted)
  7. Leamer, Edward E, 1974. "The Commodity Composition of International Trade in Manufactures: An Empirical Analysis," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 350-74, November. [Downloadable!] (restricted)
  8. Davis, D.R. & Weinstein, D.E., 1997. "Does Economic Geography Matter for International Specialization?," Papers 591, Harvard - Institute for International Development.
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  9. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June. [Downloadable!] (restricted)
  10. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January. [Downloadable!] (restricted)
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  11. 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. [Downloadable!] (restricted)
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  12. James Harrigan & Egon Zakrajsek, 2000. "Factor supplies and specialization in the world economy," Finance and Economics Discussion Series 2000-43, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  13. Dougherty, Chrys & Jorgenson, Dale W, 1996. "International Comparisons of the Sources of Economic Growth," American Economic Review, American Economic Association, vol. 86(2), pages 25-29, May.
  14. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November. [Downloadable!] (restricted)
  15. James Harrigan, 1996. "Technology, Factor Supplies and International Specialization: Estimating the Neoclassical Model," NBER Working Papers 5722, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Peter M. Morrow, 2008. "East is East and West is West: A Ricardian-Heckscher-Ohlin Model of Comparative Advantage," Working Papers 575, Research Seminar in International Economics, University of Michigan. [Downloadable!]
  2. Alejandro Cuñat & Marco Maffezzoli, 2007. "Specialization Patterns and the Factor Bias of Technology," Contributions to Macroeconomics, Berkeley Electronic Press, vol. 7(1), pages 1574-1574. [Downloadable!] (restricted)
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  3. Ciccone, Antonio & Papaioannou, Elias, 2005. "Human Capital, the Structure of Production, and Growth," CEPR Discussion Papers 5354, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Batista, Catia & Potin, Jacques, 2008. "International Specialization and the Return to Capital, 1976-2000," ESSEC Working Papers DR 08001, ESSEC Research Center, ESSEC Business School. [Downloadable!]
  5. Keith Maskus & Shuichiro Nishioka, 2008. "Development-Related Biases in Factor Productivities and the HOV Model of Trade," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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