The curse and blessing of fixed specific factors in small-open economies

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Title: The curse and blessing of fixed specific factors in small-open economies
Authors: Guillo, Maria Dolores | Pérez Sebastián, Fidel
Research Group/s: Grupo de Estudios de Paz y Desarrollo (GEPYD) | Análisis Económico
Center, Department or Service: Universidad de Alicante. Departamento de Fundamentos del Análisis Económico | Universidad de Alicante. Instituto Universitario de Desarrollo Social y Paz
Keywords: Small-open economy | Specific inputs | Long-run income
Knowledge Area: Fundamentos del Análisis Económico
Issue Date: 9-Jan-2006
Publisher: Elsevier
Citation: GUILLÓ FUENTES, María Dolores; PÉREZ SEBASTIÁN, Fidel. “The curse and blessing of fixed specific factors in small-open economies”. Journal of Development Economics. Vol. 82, No. 1 (Jan. 2007). ISSN 0304-3878, pp. 58-78
Abstract: This paper investigates how a country’s specific-factor endowment affects its long-run economic performance. We build an open-economy version of the two-sector neoclassical growth model in which we introduce fixed industry-specific inputs in both activities. We show that differences in input shares between sectors can contribute to explain why nations that seem to have similar factor endowments can show very different income levels. In particular, under (productivity-adjusted) factor-price equalization, larger amounts of factors specific to the industry with a lower (larger) labor share lead the economy to enjoy larger (smaller) long-run income levels. The model can also account for overtaking episodes between countries along their development paths.
Sponsor: European Commission (FEDER funds), the Spanish Ministry of Science and Technology (SEJ2004-08011ECON), and the Instituto Valenciano de Investigaciones Económicas.
ISSN: 0304-3878 (Print) | 1872-6089 (Online)
DOI: 10.1016/j.jdeveco.2005.11.002
Language: eng
Type: info:eu-repo/semantics/article
Peer Review: si
Publisher version:
Appears in Collections:INV - GEPYD - Artículos de Revistas
INV - Análisis Económico - Artículos de Revistas
INV - DMCTE - Artículos de Revistas

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