factor proportions and the structure of commodity trade
TRANSCRIPT
![Page 1: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/1.jpg)
Factor Proportions and the Structure of Commodity Trade
(AER 2004)
JOHN ROMALIS
![Page 2: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/2.jpg)
Introduction
• Heckscher-Ohlin model with transport costs and monopolistic competition
• Model determines the structure of production and trade.
• He wants to show that skill abundantcountries export skill intensive products to the US.
![Page 3: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/3.jpg)
Hecksher-Ohlin effect
![Page 4: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/4.jpg)
Rybczynski effect for the Asian Miracle economies
![Page 5: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/5.jpg)
Theoretical model
• H-O model with a continuum of goods• Monopolistic competition• Economies of scale• Transport costs
![Page 6: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/6.jpg)
Theoretical modelThe location of production
![Page 7: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/7.jpg)
The Separate Contributions of Transport Costs and Monopolistic Competition
![Page 8: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/8.jpg)
![Page 9: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/9.jpg)
![Page 10: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/10.jpg)
![Page 11: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/11.jpg)
Empirics
• Hecksher-Ohlin prediction:– North’s market share (x) increases with skill
intensity of the good (z) • Cross-commodity regression of x on z• z: skill intensity• k: capital intensity• m: raw material intensity
![Page 12: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/12.jpg)
Skill intensity
nonproduction workers• z2: skill intensity:
employment
![Page 13: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/13.jpg)
• Capital intensity • k3=1- (total compensation / value added)• Skill intensity• z3=z2(1-k3)
– (skill intensity * labor intensity)
• Raw material intensity• m4= raw material input / (VA+ raw material input)
Intensities (1992 US)
![Page 14: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/14.jpg)
![Page 15: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/15.jpg)
Abundance relative to the US
• Skill labor abundance= human capital (educated) / labor
• Capital abundance = capital/ labor (investment)
• Also, GDP per capita is used as proxy for both
• Raw material abundance=land area/labor
![Page 16: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/16.jpg)
The aggregate North
![Page 17: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/17.jpg)
![Page 18: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/18.jpg)
Country by country regression
![Page 19: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/19.jpg)
Country by country regression
![Page 20: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/20.jpg)
![Page 21: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/21.jpg)
Rybczynski prediction
![Page 22: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/22.jpg)
![Page 23: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/23.jpg)
RybczynskieffectTrade structure shift from 1960 to 1998
![Page 24: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/24.jpg)
![Page 25: Factor Proportions and the Structure of Commodity Trade](https://reader031.vdocuments.us/reader031/viewer/2022011913/61d7b827e314ba62414c2e9d/html5/thumbnails/25.jpg)
Conclusions
• Two reasonable modifications of the traditional Heckscher-Ohlin model. Introduction of transport costs and monopolistic competition
• Two quasi predictions find support in data