Specialization, Factor Accumulation and Development
NBER Working Paper No. 10638
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.
Published: Fitzgerald, Doireann and Juan Carlos Hallak. "Specialization, Factor Accumulation And Development," Journal of International Economics, 2004, v64(2,Dec), 277-302.