Technology differences in empirical studies of international trade

We show that the specification of technology differences in recent empirical studies of trade is not supported by basic growth theory and may lead to biased estimates of the pattern of specialization and trade. ► Empirical studies of trade employ Hicks-neutral cross-country technology differences. ►...

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Bibliographic Details
Published inEconomics letters Vol. 117; no. 1; pp. 18 - 20
Main Authors Gundlach, Erich, de Vaal, Albert
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.10.2012
Elsevier Science Ltd
Subjects
Economic theory
Estimation bias
Factor endowments
Flexible specialization
Growth models
Growth theory
International trade
Specialization bias
Studies
Technological change
Technology differences
Technology differences
Specialization bias
O41
Factor endowments
F11
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Summary:We show that the specification of technology differences in recent empirical studies of trade is not supported by basic growth theory and may lead to biased estimates of the pattern of specialization and trade. ► Empirical studies of trade employ Hicks-neutral cross-country technology differences. ► Empirical studies of growth employ Harrod-neutral technology differences. ► Harrod-neutral technology differences imply endogenous factor endowment ratios. ► Accounting for endogenous factor endowments can reverse predicted patterns of trade. ► Empirical studies of trade should assume Harrod-neutral technology differences.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2012.04.080