Endowments, Skill-Biased Technology, and Factor Prices: A Unified Approach to Trade / Peter M. Morrow, Daniel Trefler.

Format:

Book

Author/Creator:

Morrow, Peter M.

Contributor:

National Bureau of Economic Research.

Trefler, Daniel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24078.

NBER working paper series no. w24078

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Endowments, Skill-Biased Technology, and Factor Prices

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We develop a multi-factor, multi-sector Eaton-Kortum model in order to examine the impact of trade costs, factor endowments, and technology (both Ricardian and factor-augmenting) on factor prices, trade in goods, and trade in the services of primary factors (value-added trade). This framework nests the Heckscher-Ohlin-Vanek (HOV) model and the Vanek factor content of trade prediction. We take the model to the data using skilled and unskilled data for 38 countries. We have two findings. First, the key determinants of international variation in the factor content of trade are endowments and international variation in factor inputs used per dollar of output. Input-usage variation in turn is driven by (1) factor-augmenting international technology differences and (2) international factor price differences. Second, our estimates of factor-augmenting international technology differences -- which imply cross-country variation in skill-biased technologies -- are empirically similar to those used to rationalize cross-country evidence on income differences and directed technical change.

Notes:

Print version record

November 2017.