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Financial Markets, Industrial Specialization and Comparative Advantage - Evidence from OECD Countries

Author

Listed:
  • Svaleryd, Helena

    (Dept. of Economics, Stockholm University)

  • Vlachos, Jonas

    (Department of Economics, Stockholm School of Economics)

Abstract

Due to underlying technological and organizational differences, industries differ in their need for external finance. Since services provided by the financial sector are largely immobile across countries, the pattern of industrial specialization should be influenced by the degree of financial development. We find this effect to be strong. In fact, the financial sector has greater impact on industrial specialization among OECD countries than differences in human and physical capital. We also show that the causality indeed run from the financial sector to specialization. Further, financial sectors are a source of comparative advantage in a way consistent with the Hecksher-Ohlin-Vanek model. Results on which aspects of financial systems that are of importance for specialization and comparative advantage are also presented.

Suggested Citation

  • Svaleryd, Helena & Vlachos, Jonas, 2002. "Financial Markets, Industrial Specialization and Comparative Advantage - Evidence from OECD Countries," Research Papers in Economics 2002:6, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2002_0006
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    2. Apergis, Nicholas & Christou, Christina & Miller, Stephen M., 2014. "Country and industry convergence of equity markets: International evidence from club convergence and clustering," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 36-58.
    3. Miklós Koren, 2003. "Financial Globalization, Portfolio Diversification, and the Pattern of International Trade," IMF Working Papers 2003/233, International Monetary Fund.
    4. Borja Larrain, 2005. "The stock market and cross country differences in relative prices," Working Papers 05-6, Federal Reserve Bank of Boston.
    5. Nilotpal Goswami, 2013. "Determinants of Trade Development: Panel Evidence from South Asia," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 17-33, March.
    6. Feal-Zubimendi, Soledad, 2009. "Financial Development and Trade Openness: a Survey," MPRA Paper 63341, University Library of Munich, Germany.
    7. Solomos, Dionysios & Papageorgiou, Theofanis & Koumparoulis, Dimitrios, 2012. "Financial Sector and Business Cycles Determinants in the EMU context: An Empirical Approach (1996-2011)," MPRA Paper 43858, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial intermediation; Financial systems; Specialization patterns; Financial intermediation; Financial systems; Specialization patterns; Comparative advantage;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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