Factor Supplies and Specialization in the World Economy

51 Pages Posted: 29 Sep 2006

See all articles by James Harrigan

James Harrigan

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Egon Zakrajsek

Federal Reserve Board - Division of Monetary Affairs

Multiple version iconThere are 2 versions of this paper

Date Written: August 2000

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.

JEL Classification: F1

Suggested Citation

Harrigan, James and Zakrajsek, Egon, Factor Supplies and Specialization in the World Economy (August 2000). Federal Reserve Bank of New York Research Paper Series - Staff Report, No. 107. Available at SSRN: https://ssrn.com/abstract=933375 or http://dx.doi.org/10.2139/ssrn.933375

James Harrigan (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

National Bureau of Economic Research (NBER)

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Egon Zakrajsek

Federal Reserve Board - Division of Monetary Affairs ( email )

20th and C Streets, NW
Washington, DC 20551
United States
202-728-5864 (Phone)
202-452-3819 (Fax)

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