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Factor-Biased Technical Change and Specialization Patterns

Jürgen Meckl () and Ivan Savin
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Jürgen Meckl: Justus Liebig University of Giessen
Ivan Savin: Karlsruhe Institute of Technology, Germany

Central European Journal of Economic Modelling and Econometrics, 2018, vol. 10, issue 2, 75-100

Abstract: We analyze the medium- and long-run effects caused by an inflow of capital into a labor-abundant country. For that purpose, we incorporate directed technical change into a Heckscher-Ohlin model with a continuum of goods. This provides a comprehensive theory explaining the dynamics of comparative advantage based on differences in effective factor endowments, i.e. factor endowments adjusted by differences in technological levels. Our model constitutes an appropriate framework for understanding, e.g., the empirically observed changes in industrial structures of Central and Eastern European countries. Furthermore, we provide a theoretical foundation for the empirical Prospective Comparative Advantage index with new insights into the futuredynamics of comparative advantage. Eventually, we show the importance of research spillovers and state dependence on the process of convergence.

Keywords: comparative advantage; technological progress; dynamic processes; innovation; factor-biased technical change (search for similar items in EconPapers)
JEL-codes: F21 F43 O33 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:psc:journl:v:10:y:2018:i:2:p:75-100