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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2002:6:
Financial Markets, Industrial Specialization and Comparative Advantage - Evidence from OECD Countries

Helena Svaleryd and Jonas Vlachos ()

Abstract: Due to underlying technological and organizational differences, industries differ

in their need for external finance. Since services provided by the financial sector

are largely immobile across countries, the pattern of industrial specialization

should be influenced by the degree of financial development. We find this effect

to be strong. In fact, the financial sector has greater impact on industrial

specialization among OECD countries than differences in human and physical

capital. We also show that the causality indeed run from the financial sector to

specialization. Further, financial sectors are a source of comparative advantage

in a way consistent with the Hecksher-Ohlin-Vanek model. Results on which

aspects of financial systems that are of importance for specialization and

comparative advantage are also presented.

Keywords: Financial intermediation; Financial systems; Specialization patterns; Financial intermediation; Financial systems; Specialization patterns; Comparative advantage; (follow links to similar papers)

JEL-Codes: F14; G20; O16; (follow links to similar papers)

43 pages, June 13, 2002

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