hero working papers

pecialization Patterns and the Factor Bias of Technology

Number: 321
Year: 2007
Author(s): Alejandro Cuat and Marco Maffezzoli
Development accounting exercises based on an aggregate production function find tech-
nology is biased in favor of a country's abundant production factors. We provide an expla-
nation 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 technol-
ogy with the same aggregate production function for all countries, they appear to have
an abundant-factor bias in their technologies.

Keywords: International Trade, Heckscher-Ohlin, Simulation, Development Account-ing
JEL codes: F1, F4, O4