BESS at MNB November 12, 2008 Harald Fadinger: Productivity Differences in an Interdependent World

The seminar will be held in the Visitor Centre at 15:15

Harald Fadinger (University of Vienna)

Abstract

This paper studies cross country differences in productivity from an open economy perspective by using a Helpman-Krugman-Heckscher-Ohlin model. This allows to combine tools from development accounting and the trade literature. When simultaneously fitting data on income, factor prices and the factor content of trade, I find that rich countries have far higher productivities of human capital than poor ones, while differences in physical capital productivity are not sytematically related to income per worker. I estimate an aggregate elasticity of substitution between human and physical capital that is significantly below one, clearly rejecting a world that consists of a collection of Cobb-Douglas economies and also one where Heckscher-Ohlin trade is important.

Keywords: Heckscher-Ohlin, ProductivityDifferences, Development Accounting, Open Economy Growth.

JEL classification codes: F11, F43, O11, O41, O47.

paper

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