Integrated equilibrium in a Heckscher-Ohlin-Ricardo model

This paper shows that, unlike in the Heckscher-Ohlin model, the integrated equilibrium in the Davis (1995) Heckscher-Ohlin-Ricardo model depends crucially on demand patterns. The area defining the integrated equilibrium is smaller, the greater is the weight placed by consumers on the good that has different technologies across countries

Integrated equilibrium in a Heckscher-Ohlin-Ricardo model

This paper shows that, unlike in the Heckscher-Ohlin model, the integrated equilibrium in the Davis (1995) Heckscher-Ohlin-Ricardo model depends crucially on demand patterns. The area defining the integrated equilibrium is smaller, the greater is the weight placed by consumers on the good that has different technologies across countries.

Development Accounting in a Heckscher-Ohlin World

This paper tries to contribute to the strand of literature that investigates the question to what extend differences in per capita income between countries are due to differences in factor endowments like human- and physical capital on the one hand and due to differences in technology on the other hand. In particular, I am trying to assess to what extend structural transformation, ie the ability of a country to specialize in the production of goods that intensively use the factors with which it is abundantly endowed, has an important role in determining cross country income differences. I find that when productivities are country specific, for realistic parameter values structural transformation plays little role and productivity differences between countries remain large. However, when I allow for factor augmenting technology differences and factors are complementary in sectoral production, there seem to be large differences in the productivity of physical capital that are strongly correlated with per capita income, while human capital seems to have an inverse hump shape. This result is ad odds with Caselli (2005), who finds that poor countries use capital more efficiently than rich countries, while having a lower productivity of human capital. Finally, I use trade data and the Heckscher-Ohlin-Vanek equations to assess the plausibility of my calibrations and find a good fit for the model with factor specific productivities and complementary factors.

Railroads and Local Economic Development: The United States in the 1850s

We use county and individual-level data from 1850 and 1860 to examine the economic impact of gaining access to a railroad. Previous studies have found that rail access was positively correlated with the value of agricultural land at a point in time, and have interpreted this correlation as evidence that rail access chiefly benefitted agricultural land owners in the manner predicted by the Hekscher-Ohlin or Von Theunen models. We use a difference-in-difference strategy, comparing changes in outcomes in counties that gained rail access in the 1850s to those that either gained access earlier or did not have access before the Civil War. Most of the estimated effects are small and the signs are not wholly consistent with either model, under the null hypothesis that agriculture was the chief beneficiary of rail access. For example, we find that rail access appears to have increased urbanization, raised the likelihood of participation in the service sector, decreased agricultural yields, and reduced the share of improved acreage in total land area, opposite to the patterns predicted by either the Heckscher-Ohlin or Von Theunen models.

Consumption efficiency hypothesis and the HOS model: Some counterintuitive results

We show how accommodation of the consumption efficiency hypothesis can explain the existence of involuntary unemployment in the two-by-two Heckscher-Ohlin-Samuelson (HOS) model. Although the workers consume both the commodities their nutritional efficiency depends on the consumption of one commodity only. An increase in the relative price of the capital-intensive (labour-intensive) good raises (lowers) the effective employment in the economy. The effects of commodity price changes on the output levels of the two sectors might be perverse. These results are different from the standard HOS results.Consumption efficiency hypothesis; General equilibrium; Heckscher-Ohlin-Samuelson model; Effective employment; Output composition

A Complete Characterization of the Distributional Effects of International Outsourcing in the Heckscher-Ohlin Model

This paper determines the distributional effects of internationaloutsourcing in a two sector Heckscher-Ohlin type model. It isshown that the factor-biased and the sector-biased impact ofinternational outsourcing discussed in the literature can be seenas special cases of the more general characterization presented inthis paper. Concerning the welfare implications of internationaloutsourcing, the main finding is that a Pareto-improvement cannotbe excluded from a theoretical point of view.international outsourcing, general equilibrium analysis,distributional effects, welfare effects.

Transition to an open economy : an analysis of Vietnam's export performance 1986 - 2000 : a thesis presented in partial fulfilment of the requirements for the degree of Master of Business Studies in Economics at Massey University

Page 108 not in originalExternal reform is a large component of Vietnam's overall transition to a market-based economy which officially started in 1986. This study analytically and empirically examines Vietnam's export performance from 1986 to 2000. The spectacular growth in both exports and imports and significant changes in Vietnam's export composition and market structure since 1986 are delineated. Exports, as a demand source, are found to contribute an increasing part of the overall output growth. Vietnam's changing Revealed Comparative Advantage (RCA) indicates a move toward manufactured exports. Increased diversification is apparent within Vietnam's export destinations, but less diversification is evident in its export composition. A Constant-Market-Share (CMS) analysis of the sources of non-oil export growth over the period 1985-1999 shows that Vietnam's exports concentrated on commodities with import demands growing more slowly than the average of all commodities. From 1985 to 1995, Vietnam's exports benefited from increasing penetration into relatively fast growing Asian markets, but the Asian crisis of 1999 effectively derailed Vietnam's export expansion. Inability to adapt export composition and market structure to changes in world conditions affected Vietnam's increasing share in world exports. Vietnam's increased competitiveness, as reflected in the micro-share effects, is found to be the key to observed export growth, representing 118 percent of the total gain in market share from 1985 to 1999. The study further tested observed composition of manufactured exports to three selected groups of Vietnam's trading partners - the world, the OECD and the Asian developing countries - in the light of the Ricardian and the Heckscher-Ohlin theories. Empirical results provide no evidence that manufactured exports to any of these three groups of trading partners is positively correlated with labour productivity. The Heckscher-Ohlin contention that Vietnam should export relatively labour-intensive goods is supported by the pattern of Vietnam's manufactured exports to the OECD and the world, but not confirmed by its pattern of manufactured exports to the Asian developing countries

A Trade Theorist’s Take on Skilled-Labor Outsourcing

Recent concern has attended the phenomenon of skilled-labor outsourcing, in which firms in the U.S. and other advanced countries have drawn upon the services of skilled workers in developing countries for activities that they used to do at home. Motivated by this and the fact that such outsourcing would be hard to explain without technological differences, this paper explores theoretically a simple story of outsourcing in which factor proportions and technology interact across activities performed within industries or firms. The model has a single sector in which a final output is produced from two activities that differ in their intensity of use of skilled and unskilled labor. In one activity, the developed world (North) has a technical advantage. In the other it does not, but a new regime makes it possible to outsource it to the developing world (South). The paper shows that this outsourcing, if the countries continue to diversify, causes the wage of unskilled labor in North to fall below that in South. However, if factor endowments differ enough to lead to specialization, then it becomes possible for both factors in North to gain.Neoclassical Trade Models