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Title:Factor supplies and specialization in the world economy PDF Logo
Authors:Harrigan, James
Zakraj├ęsek, Egon
Issue Date:2000
Series/Report no.:Staff Report, Federal Reserve Bank of New York 107
Abstract:A core prediction of the Heckscher-Ohlin theory is that countries specialize in goods in which they have a comparative advantage, and that the source of comparative advantage is differences in relative factor supplies. To examine this theory, we use the most extensive data set available and document the pattern of industrial specialization and factor endowment differences in a broad sample of rich and developing countries over a lengthy period (1970-92). Next, we develop an empirical model of specialization based on factor endowments, allowing for unmeasurable technological differences, and estimate it using panel data techniques. In addition to estimating the effects of factor endowments, we consider the alternative hypothesis that the level of aggregate productivity by itself can explain specialization. Our results clearly show the importance of factor endowments on specialization: relative endowments do matter.
Subjects:Industrial location
International trade
Industrial productivity
JEL:F1
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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