The great realignment: How factor-biased innovation reshaped comparative advantage in the U.S. and Japan, 1970-1992 [An article from: Japan & The World Economy]

This digital document is a journal article from Japan & The World Economy, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Recent changes in comparative advantage in the largest OECD economies contradict static Heckscher-Ohlin-Vanek theory. Japan's rising share of machinery exports and the improved comparative advantage of the USA in heavy industry were accompanied by growing scarcities of factors used intensively in these sectors. We show that under factor-price equalization, directed technical change leads to increasing specialization in goods intensive in each country's abundant factor. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find that international comparative advantage was reshaped by biased innovation in the largest economies that increased the effective stocks of their abundant factors.