Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 449: Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries.

Jonas Vlachos () and Helena Svaleryd
Additional contact information
Jonas Vlachos: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Helena Svaleryd: Department of Economics, Postal: Stockholm University, Universitetsvägen 10A, S-106 09 Stockholm, Sweden

Abstract: Due to underlying technological differences, industries differ in their need for external finance. Since the services provided by the financial sector are largely immobile across countries, the pattern of specialization should be influenced by the degree of financial development. We find that this effect is strong: The financial sector has an even greater impact on the pattern of specialization among OECD countries than do differences in human- and physical capital. Further, it gives rise to comparative advantage in a way consistent with the Hecksher-Ohlin-Vanek model. Results on which aspects of financial systems that matter for specialization are also presented.

Keywords: Financial intermediation; Financial systems; Specialization patterns; Comparative advantage

JEL-codes: F14; G20; O16

39 pages, First version: May 30, 2001. Revised: November 8, 2001. Earlier revisions: September 3, 2001, May 30, 2001, September 20, 2001, November 8, 2001.

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