Working Paper: CEPR ID: DP1554
Authors: Johan Torstensson
Abstract: We formulate a simple model that captures two recent hypotheses: (i) that countries with an abundant absolute endowment of skilled labour will be net exporters in R&D-intensive industries; and (ii) that countries with a large domestic market will be net exporters in scale-intensive industries. The hypotheses are empirically tested by studying the trade of each and every OECD country individually. Thereafter, we pool the data into one regression by introducing, simultaneously, country and industry characteristics. The results offer relatively strong support for hypothesis (i) and some support for hypothesis (ii).
Keywords: country size; comparative advantage; economic geography; trade
JEL Codes: F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| abundant skilled labor (J24) | technological advantage in R&D-intensive industries (O39) |
| technological advantage in R&D-intensive industries (O39) | net exports in R&D-intensive sectors (O39) |
| large domestic markets (P23) | net exports in scale-intensive industries (F12) |
| skilled labor endowment (J24) | efficiency improvements in technology (O49) |
| market size effects (L25) | trade flows in scale-intensive industries (F12) |