Working Paper: NBER ID: w10638
Authors: Doireann Fitzgerald; Juan Carlos Hallak
Abstract: We estimate the effect of factor proportions on the pattern of manufacturing specialization in a cross-section of OECD countries, taking into account that factor accumulation responds to productivity. We show that the failure to control for productivity differences produces biased estimates. Our model explains 2/3 of the observed differences in the pattern of specialization between the poorest and richest OECD countries. However, because factor proportions and the pattern of specialization co-move in the development process, their strong empirical relationship is not sufficient to determine whether specialization is driven by factor proportions, or by other mechanisms also correlated with level of development.
Keywords: No keywords provided
JEL Codes: F1; F11; O14; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| factor endowments (D29) | manufacturing specialization patterns (L23) |
| productivity (O49) | factor endowments (D29) |
| productivity (O49) | manufacturing specialization patterns (L23) |
| development context (O19) | manufacturing specialization patterns (L69) |
| productivity differences (O49) | bias in estimates of relationship between factor endowments and specialization (F16) |