TY - JOUR AU - Kraay,Aart AU - Ventura,Jaume TI - Comparative Advantage and the Cross-section of Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 8104 PY - 2001 Y2 - January 2001 UR - http://www.nber.org/papers/w8104 L1 - http://www.nber.org/papers/w8104.pdf N1 - Author contact info: Aart Kraay The World Bank Group Mail Stop MC3-301 1818 H Street NW Washington, DC 20433 Tel: 202 473-5756 Fax: 202 522-3518 E-Mail: AKraay@worldbank.org Jaume Ventura CREI Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 08005-Barcelona SPAIN Tel: +34 93 542 1765 Fax: +34 93 542 1860 E-Mail: jventura@crei.cat AB - Business cycles are both less volatile and more synchronized with the world cycle in rich countries than in poor ones. We develop two alternative explanations based on the idea that comparative advantage causes rich countries to specialize in industries that use new technologies operated by skilled workers, while poor countries specialize in industries that use traditional technologies operated by unskilled workers. Since new technologies are difficult to imitate, the industries of rich countries enjoy more market power and face more inelastic product demands than those of poor countries. Since skilled workers are less likely to exit employment as a result of changes in economic conditions, industries in rich countries face more inelastic labour supplies than those of poor countries. We show that either asymmetry in industry characteristics can generate cross-country differences in business cycles that resemble those we observe in the data. ER -