Publication: Comparative Advantage, International Trade, and Fertility
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Published
2015-10-23
ISSN
0304-3878
Date
2016-01-19
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Abstract
We analyze theoretically and empirically the impact of comparative advantage in international trade on fertility. We build a model in which industries differ in the extent to which they use female relative to male labor, and countries are characterized by Ricardian comparative advantage in either female-labor or male-labor intensive goods. The main prediction of the model is that countries with comparative advantage in female-labor intensive goods are characterized by lower fertility. This is because female wages, and therefore the opportunity cost of children are higher in those countries. We demonstrate empirically that countries with comparative advantage in industries employing primarily women exhibit lower fertility. We use a geography-based instrument for trade patterns to isolate the causal effect of comparative advantage on fertility.
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Publication Comparative Advantage, International Trade, and Fertility(World Bank, Washington, DC, 2014-06)This paper analyzes theoretically and empirically the impact of comparative advantage in international trade on fertility. It builds a model in which industries differ in the extent to which they use female relative to male labor and countries are characterized by Ricardian comparative advantage in either female labor or male labor intensive goods. The main prediction of the model is that countries with comparative advantage in female labor intensive goods are characterized by lower fertility. This is because female wages and therefore the opportunity cost of children are higher in those countries. The paper demonstrates empirically that countries with comparative advantage in industries employing primarily women exhibit lower fertility. The analysis uses a geography-based instrument for trade patterns to isolate the causal effect of comparative advantage on fertility.Publication Engendering trade(2011-08-01)The authors analyze the interaction between a country's world market integration and its attitude towards gender roles. They discuss both theoretically and empirically how female empowerment is a source of comparative advantage that shapes a country's response to trade opening. Reciprocally, the authors show that as countries integrate into the world economy, the costs and benefits of gender discrimination shift. Their theory goes beyond a potential aggregate wealth effect associated with trade opening, and emphasizes the heterogeneity of impacts. On the one hand, countries in which women are empowered -- measured by fertility rates, female labor force participation or female schooling -- experience an expansion of industries that use female labor relatively more intensively. On the other hand, the gender gap is smaller in countries that export more in relatively female-labor intensive sectors. In an increasingly globalized economy, the road to gender equality is paradoxically very specific to each country s productive structure and exposure to world markets.Publication Comparative Advantage, Demand for External Finance, and Financial Development(World Bank, Washington, DC, 2006-04)The differences in the levels of financial development between industrial and developing countries are large and persistent. Theoretical and empirical literature has argued that these differences are the source of comparative advantage and could therefore shape trade patterns. This paper points out the reverse link: financial development is influenced by comparative advantage. The authors illustrate this idea using a model in which a country's financial development is an equilibrium outcome of the economy's productive structure: financial systems are more developed in countries with large financially intensive sectors. After trade opening demand for external finance, and therefore financial development, are higher in a country that specializes in financially intensive goods. By contrast, financial development is lower in countries that primarily export goods which do not rely on external finance. The authors demonstrate this effect empirically using data on financial development and export patterns in a panel of 96 countries over the period 1970-99. Using trade data, they construct a summary measure of a country's external finance need of exports and relate it to the level of financial development. In order to overcome the simultaneity problem, they adopt a strategy in the spirit of Frankel and Romer (1999). The authors exploit sector-level bilateral trade data to construct, for each country and time period, a predicted value of external finance need of exports based on the estimated effect of geography variables on trade volumes across sectors. Their results indicate that financial development is an equilibrium outcome that depends strongly on a country's trade pattern.Publication Engendering Trade(Washington, DC: World Bank, 2012)The authors analyze the interaction between a country's world market integration and its attitude towards gender roles. They discuss both theoretically and empirically how female empowerment is a source of comparative advantage that shapes a country's response to trade opening. Reciprocally, the authors show that as countries integrate into the world economy, the costs and benefits of gender discrimination shift. Their theory goes beyond a potential aggregate wealth effect associated with trade opening, and emphasizes the heterogeneity of impacts. On the one hand, countries in which women are empowered--measured by fertility rates, female labor force participation or female schooling--experience an expansion of industries that use female labor relatively more intensively. On the other hand, the gender gap is smaller in countries that export more in relatively femalelabor intensive sectors. In an increasingly globalized economy, the road to gender equality is paradoxically very specific to each country's productive structure and exposure to world markets.Publication Trade and Financial Development(World Bank, Washington, D.C., 2004-04)The differences in financial development between advanced and developing countries are pronounced. It has been observed, both theoretically and empirically, that these differences in countries' financial systems are a source of comparative advantage and trade. This paper points out that to the extent a country's financial development is endogenous, it will in turn be influenced by trade. The paper builds a model in which a country's financial development is an equilibrium outcome of the economy's productive structure: in countries with large financially intensive sectors financial systems are more developed. When a wealthy and a poor country open to trade, the financially dependent sectors grow in the wealthy country, and so does the financial system. By contrast, as the financially intensive sectors shrink in the poor country, demand for external finance decreases and the domestic financial system deteriorates. This paper describes the authors' test model using data on financial development for a sample of 77 countries. The authors find that the main predictions of the model are borne out in the data: trade openness is associated with faster financial development in wealthier countries, and with slower financial development in poorer ones.
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