Review of Economic Studies Vol. 52 No. 2 1985
Capital Utilization and Factor Specificity
Abstract
In this study a model of firm behavior that allows the level of capital utilization to be optimally chosen by cost-minimizing firms is embedded into the standard specific-factors model employed in the international trade literature. The resulting generalization of the specific-factors model provides several new insights. For instance, allowing for variable utilization in either or both sectors gives rise to a greater variety of possible trade patterns than forcing utilization to remain constant. Similarly, international differences in the willingness to work during abnormal hours generate a wider variety of trade patterns than are possible in the standard specific-factors model. Finally, this model allows a reconciliation of the “dual scarcity” explanation of the nineteenth century Anglo-American pattern of trade with the historical evidence on levels of utilization.
- DOI
- 10.2307/2297624
- Volume
- 52
- Issue
- 2
- Pages
- 311
- Sources
- openalex crossref