Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127060
Authors: 
Ishise, Hirokazu
Year of Publication: 
2015
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 940
Abstract: 
I consider how heterogeneity in capital goods affects international trade patterns, and I show a novel source of comparative advantage: the magnitude of capital goods heterogeneity. Capital goods are heterogeneous in their vintage and productivity, and due to capacity constraints, only productive capital goods are activated in the equilibrium. Through this selection, the distribution of capital goods determines the industry-level productivity: industry-level productivity is higher in an industry with relatively larger variation in capital goods, and hence in a perfectly competitive two-country, two-good, two-factor equilibrium, the industry has Ricardian comparative advantage. An extension of the model, including fixed trade cost, describes a sorting situation in which the most productive production units (which are generally newer vintage) export, the moderately productive units serve the domestic market, and the least productive units (older) do not operate.
Subjects: 
Ricardian trade model
Putty-clay technology
Vintage capital
Capacity utilization rate
Sorting in destination
JEL: 
F11
D24
E22
E23
Document Type: 
Working Paper

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