Specialization alters the incidence of manufacturing trade costs to buyers and sellers, with pro-and anti-globalizing effects on 76 countries from 1990-2002. The structural gravity model yields measures of Constructed Home Bias (the ratio of predicted local trade to predicted frictionless local...

We model the implications of the classical ideas that larger markets allow for a finer division of labor and this division feeds back into larger market size. Market size affects specialization due to firm-level increasing returns to scale arising from fixed costs of adopting...

We argue that trade in intermediate inputs, or 'global production sharing,' is a potentially important explanation for the increase in the wage gap between skilled and unskilled workers in the U.S. and elsewhere. Using a simple model of heterogeneous activities within an industry, we show that...

Many previous tests of Heckscher-Ohlin trade theory have found underwhelming support for the idea that countries' endowments determine their production and trade. This paper demonstrates that those efforts suffer from their focus on the narrower of the model's two potential equilibria, which...

We show that even in the absence of diminishing returns in production and techno-logical spillovers, international trade leads to a stable world income distribution. This is because specialization and trade introduce de facto diminishing returns: countries that accumulate capital faster than...

A core prediction of the Heckscher-Ohlin theory is that countries specialize in goods in which they have a comparative advantage, and that the source of comparative advantage is differences in relative factor supplies. To examine this theory, we use the most extensive dataset available and...

Many empirical studies have found a positive relationship between openness and growth in per capita GDP in less developed countries, and economists have produced many explanations for this correlation. However, the existing studies are consistent with all of these theories and thus do not...

This paper embeds variable effort into a traditional multi-sector model. Effort enters a production function like total-factor-productivity and on the assumption that effort doesn't affect capital depreciation, the capital-cost savings from high effort operations are passed on to workers. The...

The standard neoclassical model of trade theory predicts that international specialization will be jointly determined by cross-country differences in relative factor endowments and relative technology levels. This paper uses duality theory combined with a flexible functional form to specify an...

This paper examines the home country bias in the goods market among OECD countries. An average country imports about two and a half times as much from itself as from an otherwise identical foreign country, after controlling for sizes of exporter and importer, their direct distance, geographic...