A Story of Trade-Induced Industrialization

Alan Deardorff and Jee-Hyeong Park
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Jee-Hyeong Park: Seoul National University

No 608, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: We offer a simple variant of the standard Heckscher-Ohlin Model that explains how a developing country, by opening to trade with a large capital-abundant economy, can be induced to shift resources into more capital-intensive production than what it was producing in autarky. As a result it experiences a rise in its return to capital and, if capital is internationally mobile, both an increase in its capital stock and an increase in trade. These results arise in a model in which both a traditional and a modern sector can produce final goods that are perfect substitutes. The modern sector uses intermediate inputs that differ in their relative capital intensities, while being both more capital intensive than the traditional sector. The results of this model accord well with the experience of the Asian Tiger economies during the early decades of their export-oriented industrialization.

Keywords: Industrialization; Trade; Intermediate Inputs; Heckscher-Ohlin Model; Asian Tiger Economies (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-05
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: A Story of Trade-induced Industrialization (2010)
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