Factor Proportions and the Growth of World Trade

Robert Zymek

No 2013-77, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: Most of the expansion of global trade during the last three decades has been of the North-South kind - between capital-abundant developed and labour-abundant developing countries. Based on this observation, I argue that the recent growth of world trade is best understood from a factor-proportions perspective. I present novel evidence documenting that differences in capital-labour ratios across countries have increased in the wake of two shocks to the global economy: i) the opening up of China and ii) financial globalisation and the resulting upstream capital flows towards capital-abundant regions. I analyse their impact on specialisation and the volume of trade in a dynamic model which combines factor-proportions trade in goods with international trade in financial assets. Calibrating this model, I find that it can account for 60% of world trade growth between 1980 and 2007. It is also capable of predicting international investment patterns which are consistent with the data

Keywords: Heckscher-Ohlin; international trade; China; financial globalisation (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Factor proportions and the growth of world trade (2015)
Working Paper: Factor Proportions and the Growth of World Trade (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:498

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