Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model

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Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model

October 1996 Number 15

JEL classification: F1, F11

Author: James Harrigan

The standard neoclassical model of trade theory predicts that international specialization will be jointly determined by cross-country differences in relative factor endowments and relative technology levels. This paper uses economic theory to specify an empirical model of specialization consistent with the neoclassical explanation. According to the empirical model, a sector's share in GDP depends on both relative factor supplies and relative technology differences, and the estimated parameters of the model have a close and clear connection to theoretical parameters. The model is estimated for manufacturing sectors using a twenty-year, ten-country panel of data on the industrialized countries. Relative technology levels and factor supplies are both found to be an important determinant of specialization.

The full text of this report is not available. For a published version of the report, see James Harrigan, "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review 87, no.4 (September 1997): 475-94.

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