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37
Increasing Returns and All That: A View From Trade
 American Economic Review
, 1997
"... Do scale economies contribute to our understanding of international trade? Do international trade flows encode information about the extent of scale economies? To answer these questions we examine the large class of general equilibrium theories that imply HelpmanKrugman variants of the Vanek factor ..."
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Cited by 47 (4 self)
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Do scale economies contribute to our understanding of international trade? Do international trade flows encode information about the extent of scale economies? To answer these questions we examine the large class of general equilibrium theories that imply HelpmanKrugman variants of the Vanek factor content prediction. Using an ambitious database on output, trade flows, and factor endowments, we find that scale economies significantly increase our understanding of the sources of comparative advantage. Further, the HelpmanKrugman framework provides a remarkable lens for viewing the general equilibrium scale elasticities encoded in trade flows. In particular, we find that a third of all goodsproducing industries are characterized by scale. (The modal range of scale elasticities for this group is 1.101.20 and the economywide scale elasticity is 1.05.) Implications are drawn for the tradeandwages debate (skillbiased scale effects) and endogenous growth. (JEL F11, F12, D2) Over the last 20 years, general equilibrium models of international trade featuring increasing returns to scale have revitalized the international trade research agenda. Yet general equilibrium econometric work remains underdeveloped: it has been scarce, only occasionally wellinformed by theory, and almost always devoid of economicallymeaningful alternative hypotheses. There are exceptions of course. These include Helpman (1987), Hummels and Levinsohn (1993, 1995), Brainard (1993, 1997), Harrigan (1993, 1996), and Davis and Weinstein (1996). However, this list is as short as the work is hard. The complexity of general equilibrium, increasing returns to scale predictions has deflected empirical research of the kind that is closely aligned with theory. Surprisingly, one empirically tractable predic...
LaborMarket Adjustment in Open Economies: Evidence from
, 2000
"... Abstract. In this paper we analyze whether regional economic integration across U.S. states conditions local labormarket adjustment. We examine the mechanisms through which states absorb changes in labor supplies and whether industry production techniques are similar across states. There are two ma ..."
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Cited by 33 (4 self)
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Abstract. In this paper we analyze whether regional economic integration across U.S. states conditions local labormarket adjustment. We examine the mechanisms through which states absorb changes in labor supplies and whether industry production techniques are similar across states. There are two main findings. First, states absorb changes in employment primarily through changes in production techniques that are common across all states and through changes in the output of traded goods, with the former mechanism playing the larger role. In contrast, statespecific changes in production techniques, which are one indication of statespecific changes in relative factor prices, account for relatively little factor absorption. Second, industry production techniques are very similar across states, especially for neighboring states and states with similar relative labor supplies. Both sets of results are consistent with productivityadjusted FPE across either all states or groupings of related states.
Testing the augmented Solow model
 Journal of Applied Econometrics
, 1995
"... This paper applies robustness ideas from the modern statistics literature to the study of the augmented Solow model. It also tests the model in other dimensions, including sensitivity to measurement error. The main ¯ndings are that the speed of conditional convergence is highly uncertain, that techn ..."
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Cited by 30 (3 self)
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This paper applies robustness ideas from the modern statistics literature to the study of the augmented Solow model. It also tests the model in other dimensions, including sensitivity to measurement error. The main ¯ndings are that the speed of conditional convergence is highly uncertain, that technology parameters obtained from the augmented Solow model cannot be trusted, and that the model does not work well when attention is restricted to either the OECD or developing countries. Not only that, the equation for steady state human capital is rejected by the data. I am grateful to Steven Klepper, John Muellbauer, Steve Nickell and Steve Redding for useful comments and suggestions. y Email jon.temple@nu±eld.oxford.ac.uk This paper examines the adequacy of the augmented Solow model for explaining international variation in the standard of living. In particular, is technology usefully described by a common CobbDouglas production function, which takes human capital as one of its in...
Bayesian Estimation and Testing of Structural Equation Models
 Psychometrika
, 1999
"... The Gibbs sampler can be used to obtain samples of arbitrary size from the posterior distribution over the parameters of a structural equation model (SEM) given covariance data and a prior distribution over the parameters. Point estimates, standard deviations and interval estimates for the parameter ..."
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Cited by 27 (8 self)
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The Gibbs sampler can be used to obtain samples of arbitrary size from the posterior distribution over the parameters of a structural equation model (SEM) given covariance data and a prior distribution over the parameters. Point estimates, standard deviations and interval estimates for the parameters can be computed from these samples. If the prior distribution over the parameters is uninformative, the posterior is proportional to the likelihood, and asymptotically the inferences based on the Gibbs sample are the same as those based on the maximum likelihood solution, e.g., output from LISREL or EQS. In small samples, however, the likelihood surface is not Gaussian and in some cases contains local maxima. Nevertheless, the Gibbs sample comes from the correct posterior distribution over the parameters regardless of the sample size and the shape of the likelihood surface. With an informative prior distribution over the parameters, the posterior can be used to make inferences about the parameters of underidentified models, as we illustrate on a simple errorsinvariables model.
A Monte Carlo Study of Growth Regressions
 NBER Technical Working Paper
, 2004
"... Using Monte Carlo simulations, this paper evaluates the bias properties of estimators commonly used to estimate growth regressions derived from the Solow model. We explicitly allow for measurement error in the righthand side variables as well as countryspecific effects that are correlated with the ..."
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Cited by 17 (2 self)
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Using Monte Carlo simulations, this paper evaluates the bias properties of estimators commonly used to estimate growth regressions derived from the Solow model. We explicitly allow for measurement error in the righthand side variables as well as countryspecific effects that are correlated with the regressors. Using an OLS estimator applied to a single crosssection of variables averaged over time (the between estimator) performs best in terms of the extent of bias on each of the estimated coefficients. The BlundellBond system GMM estimator also performs relatively well. The fixedeffects and the ArellanoBond estimators overstate the speed of convergence under a wide variety of assumptions concerning the type and extent of measurement error, while between understates it somewhat. Finally, fixed effects and ArellanoBond bias towards zero the slope estimates on the human and physical capital accumulation variables, while the between estimator and BlundellBond bias these coefficients upwards.
The Gains From Trade: Standard Errors with the CES Monopolistic Competition Model
, 1999
"... As currently implemented, the workhorse econometric models of international trade (monopolistic competition, HeckscherOhlin, and gravity) do not rigorously incorporate product prices into their estimating equations. They are thus of limited value for assessing the gains from trade liberalization ..."
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Cited by 12 (0 self)
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As currently implemented, the workhorse econometric models of international trade (monopolistic competition, HeckscherOhlin, and gravity) do not rigorously incorporate product prices into their estimating equations. They are thus of limited value for assessing the gains from trade liberalization. We model general equilibrium product price e#ects using the CES monopolistic competition model. We then estimate the model and, mimicking computable general equilibrium (CGE) models, use the model to estimate the compensating variation associated with trade liberalization.
Partial identification of probability distributions with misclassified data
 J. Econometrics
, 2008
"... This paper addresses the problem of data errors in discrete variables. When data errors occur, the observed variable is a misclassified version of the variable of interest, whose distribution is not identified. Inferential problems caused by data errors have been conceptualized through convolution a ..."
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Cited by 11 (1 self)
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This paper addresses the problem of data errors in discrete variables. When data errors occur, the observed variable is a misclassified version of the variable of interest, whose distribution is not identified. Inferential problems caused by data errors have been conceptualized through convolution and mixture models. This paper introduces the direct misclassification approach. The approach is based on the observation that in the presence of classification errors, the relation between the distribution of the “true ” but unobservable variable and its misclassified representation is given by a linear system of simultaneous equations, in which the coefficient matrix is the matrix of misclassification probabilities. Formalizing the problem in these terms allows one to incorporate any prior information − e.g., validation studies, economic theory, social and cognitive psychology − into the analysis through sets of restrictions on the matrix of misclassification probabilities. Such information can have strong identifying power; the direct misclassification approach fully exploits it to derive identification regions for any real functional of the distribution of interest. A method for estimating the identification regions and construct their confidence sets is given, and illustrated with an empirical analysis of the distribution of
Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD
 Journal of Economic Integration
, 2000
"... A large share of world trade, especially among the OECD countries, is twoway trade within industries, so called intraindustry trade. Despite this, few attempts have been made to examine why countries export some products within industries, whereas they import others. We examine this issue, by mean ..."
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Cited by 11 (0 self)
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A large share of world trade, especially among the OECD countries, is twoway trade within industries, so called intraindustry trade. Despite this, few attempts have been made to examine why countries export some products within industries, whereas they import others. We examine this issue, by means of regression analysis, by examining the shares of IIT that are vertical and horizontal and by examining price dispersion. The regression results suggest that an abundant human capital endowment as well as a large domestic market increases the quality of OECDcountries’ manufacturing exports, thus offering support for comparative advantage models as well as newer geography models. We do not, however, find support of increased concentration of production within industries. But, human capital becomes an increasingly important determinant of quality over time.