Factor Uses and the Pattern of Specialization

15 Pages Posted: 2 Apr 2008

See all articles by Georg Schaur

Georg Schaur

University of Tennessee, Knoxville - College of Business Administration - Department of Economics

Chong Xiang

Purdue University - Krannert School of Management

Anya Samek

University of California, San Diego (UCSD) - Rady School of Management; Center for Economic and Social Research (CESR)

Abstract

We show that in the setting of multiple goods and factors, the factor proportions theory has the following prediction: across industries, the impacts of the endowment of a given factor on industry outputs have positive co-variance with the relative uses of this factor. The intuition is that, on average, the industries that use a given factor heavily have positive output responses, following an increase in the endowment of this factor. This co-variation condition is robust to Hicks neutral- and factor-augmenting productivity differences, and constitutes a direct test of the production side of the factor proportions theory. We also show that the co-variation condition finds empirical support. This is evidence that is consistent with the factor proportions theory.

Suggested Citation

Schaur, Georg and Xiang, Chong and Samek, Anya, Factor Uses and the Pattern of Specialization. Review of International Economics, Vol. 16, Issue 2, pp. 368-382, May 2008, Available at SSRN: https://ssrn.com/abstract=1115548 or http://dx.doi.org/10.1111/j.1467-9396.2007.00721.x

Georg Schaur (Contact Author)

University of Tennessee, Knoxville - College of Business Administration - Department of Economics ( email )

508 Stokely Management Center
Knoxville, TN 37996-0550
United States

Chong Xiang

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Anya Samek

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive #0553
Rady School of Management
La Jolla, CA 92093-0553
United States

HOME PAGE: http://anyasamek.com

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

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