부산대학교 도서관

Summary: This research offers an explanation of why income per capita differs across countries, using as reference the multi - cone Heckscher - Ohlin model of international trade. Using data on GDP per worker and industry level employment GDP functions are estimated for labor, capital, and petroleum abundant countries in 1970, 1980, 1990, and 2000; estimated coefficients represent labor productivities, which reflect factor returns. Results indicate that the most productive persons work in manufacturing, followed by workers in services and agriculture. Between 1970 and 2000 labor abundant countries experienced a decline in labor productivity in all industries, particularly in labor intensive manufacturing, where it fell 41%; there is no evidence of a premium on human capital, measured as productivity differences in capital and labor intensive manufacturing. The estimated patterns in labor productivity illustrate why these countries have not increased their standard of living, since their labor force has become less productive over time; the absence of a premium on human capital signals the lack of incentives in these economies to accumulate the human capital needed to upgrade the employment mix in favor of higher productivity activities. During the same period productivity in capital abundant countries increased in all industries; productivity increased 90% in capital intensive manufacturing and 4% in labor intensive activities. These countries display an increasing premium on human capital, since productivity differences increased from $3,100 in 1970 to $26,600 in 2000. Results help to explain the inability of labor abundant countries to increase income per capita, as well as the divergence in income levels in favor of capital abundant countries and against labor abundant economies at different points in time and during the sample period. Differences in the employment mix, however, explain only part of the differences in GDP per worker across countries; preliminary evidence suggests that technology driven differences in labor productivity may also be an important element that explains why some countries are richer than others.