Factor proportions and product cycle: a study of export patterns in manufactured products

Abstract

This dissertation seeks to empirically examine the hypotheses suggested by the model of trade in manufactured goods, based on international differences in relative abundance of labor skills and on inter-country differences in ability to develop new products.

Extensive theoretical and empirical literature shows that the traditional trade theory alone fails to provide a satisfactory explanation of modern industrial trade patterns. This study proposes that the neo-factor or skill approach, and the neo-technology or product cycle approach, treated as complementary components of a single framework, offer a potentially useful tool for examining national manufacturing export structures. The two approaches, initially meant to explain export performance of the U.S. industries, are found to perform well in the cross-country study covering a wide variety of economies.

The empirical analysis produces some tentative evidence that the neo-factor approach and the neo-technology approach are especially well suited to explain trade composition in two different classes of manufactures, "mature" and "new" products, respectively. Further, the two theories are tested against data covering 69 3-digit SITC industrial product groups. Across countries; skill intensity of exports is found to be positively and significantly correlated with various proxies for the availability of skills. Export performance in relatively newly developed products, and in those with high R&D content, turn out to be positively and significantly correlated with various measures of innovative capability. Finally, it is demonstrated that for most of the economies in the sample, export performance over manufactured products with varying skill intensity, R&D content, and age, is subject to intertemporal changes as suggested by the notion of product cycle.