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Specialization Patterns and the Factor Bias of Technology

Alejandro Cunat () and Marco Maffezzoli ()

No 321, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Development accounting exercises based on an aggregate production function find technology is biased in favor of a country's abundant production factors. We provide an explanation to this finding based on the Heckscher-Ohlin model. Countries trade and specialize in the industries that use intensively the production factors they are abundantly endowed with. For given factor endowment ratios, this implies smaller international differences in factor price ratios than under autarky. Thus, when measuring the factor bias of technology with the same aggregate production function for all countries, they appear to have an abundant-factor bias in their technologies.

Date: 2007
New Economics Papers: this item is included in nep-dev, nep-ino and nep-int
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