The Shape of the Division of Labour
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The Shape of the Division of Labour

Nations, Industries and Households

Edited by Robert M. Solow and Jean-Philippe Touffut

How is work divided up in the household, within an industry, a nation or between continents? What are the dynamics of the division of labour? The wide-ranging contributions to this book explore these questions from technological, capital and political perspectives. They include in-depth studies of gender, the firm, countries’ economic specializations, ICTs, foreign direct investment and agriculture. In this book, ten distinguished contributors – economists, scholars and practitioners – take stock of the shape of the division of labour and provide useful policy recommendations.
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Chapter 3: Labour Market Frictions as a Source of Comparative Advantage: Implications for Unemployment and Inequality

Elhanan Helpman


1 Elhanan Helpman INTRODUCTION Until the 1980s, studies of international trade were dominated by two sources of comparative advantage: technological capabilities and factor endowments. The former approach, originally attributed to David Ricardo, starts from the observation that sectoral relative labour productivity varies across countries, and derives from this feature implications for the structure of foreign trade. The latter approach, originally attributed to Eli Heckscher and reformulated by Bertil Ohlin, starts from the observation that endowments vary across countries, and derives from this feature implications for the structure of trade, assuming that technologies are the same in every country. While the Ricardian approach abstracts from differences in the composition of factor endowments, the Heckscher– Ohlin approach abstracts from differences in technologies. These two approaches are complementary to each other, emphasizing alternative sources of comparative advantage. Both focus, however, on explaining the structure of trade at the sectoral level, that is, on predicting which country exports food, which exports electronic products, which exports chemical products, and so forth. As growth in world trade proceeded at a rapid pace after World War Two, and especially so in manufactures, it became apparent that this focus was not adequate, because much of world trade was taking place within industries. Namely, many countries both exported and imported food, exported and imported electronic products, and exported and imported chemical products. Moreover, it was recognized that an emphasis on differences across countries, either in technologies or factor endowments, is useful for explaining trade among countries that differ from...

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