Download this Paper Open PDF in Browser

Do Countries Specialize?

44 Pages Posted: 19 Feb 2001  

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Date Written: January 2001

Abstract

Do rich and poor countries compete by exporting the same mix of goods to the US? Using highly disaggregate trade flow data ? which breaks US imports into thousands rather than tens of goods ? this paper documents two significant trends. First, the portion of US imports originating in either rich or poor countries exclusively has fallen dramatically as world trade has increased, from 50% in 1972 to 25% in 1994. This heightened export competition among countries with vastly different factor endowments is greatest in manufactures, particularly apparel and textiles, and smallest in natural resources. Second, when rich and poor countries both export a manufactured good to the US, rich countries receive a significantly higher price for their export than poor countries, and this disparity increases with time. To the extent that this heterogeneity maps into product differences, it consistent with the type of specialization implied by both the Heckscher-Ohlin model of trade and Product Cycle theory. On the other hand, significant intra-good price differences are troubling for existing empirical trade research because they suggest that even a very fine categorization of commodities may be too coarse for the assumptions underlying most trade models. We discuss the implications of unaccounted-for product heterogeneity for previous Heckscher-Ohlin estimations as well as its potential relevance for the trade and wages debate.

JEL Classification: F11, F14, F2, C21

Suggested Citation

Schott, Peter K., Do Countries Specialize? (January 2001). Yale SOM Working Paper No. ES-06. Available at SSRN: https://ssrn.com/abstract=258273 or http://dx.doi.org/10.2139/ssrn.258273

Peter K. Schott (Contact Author)

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-4260 (Phone)
203-436-6974 (Fax)

HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Paper statistics

Downloads
384
rank
65,428
Abstract Views
3,750