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C H A P T E R 4 Qualitative Information on Nonstandard Trade Determinants: Summary Statistics from Trade Data Ivan Yakovlevich ... had remembered where he had seen the nose before and it was on none other than the Collegiate Assessor Kovalev, whom he shaved regularly each Wednesday and Sunday.... Like every self-respecting Russian tradesman, Ivan Yakovlevich was a terrible drunkard. And although he shaved other people's chins every day, his own looked permanently unshaven. —Nikolai Gogol, The Nose In empirical applications of the standard theory of international trade, economists have tended to emphasize a narrow range of trade determinants. The great triumvirate—land, labor, and capital—usually span the spectrum of factors analyzed.1 However, differences in the economic performance of nations are plausibly the product of a much wider set of influences. For example, Gogol's Yakovlevich reminds us that lack of sensitivity to quality of service might be a more enduring determinant of Russian economic performance than the more usual factor endowments. Nothing in the standard theory restricts its application to the usual narrow range of variables. One can speak just as easily of an endowment of entrepreneurship or of quality orientation as of an endowment of capital.2 If these alternative endowments were given a place in the national production function, the usual results would apply to these factors also. The reason the nonstandard factors have been ignored in empirical work is obvious. Such factors are difficult, often impossible, to measure. But one should be clear about the properties of empirical work ignoring these factors. ' See, e.g., Learner 1984. 2 In speaking of such factors as national differences in entrepreneurship, there is no implication that these are inherited. Religions, educational systems, family structure, and historical experience , which vary enormously from country to country, could all influence the acquisition of such talents as entrepreneurship. Qualitative Information on Trade 83 Such work is second-best, with no claims to optimality. Thus, it might be appropriate to use alternative second-best procedures—ones that include the nonstandard variables but that do not use statistical techniques requiring extensive quantitative information on factor endowments. When the absence of data means that the most sophisticated procedures must omit variables, simple summary statistics can be just as valuable as maximum likelihood estimates. The sections that follow present measures of trade performance obtained by subjecting trade data to simple transformations that are based on rudimentary information about the characteristics of the sectors in which goods are produced. These transformations are simply ones producing the revealed comparative advantages (RCAs) discussed in Chapter 2. Section 4.1 examines the information content of the RCAs in the light of international trade theory. Section 4.2 describes the information employed in forming commodity aggregates that are particularly informative about the phenomena of interest. Sections 4.3-4.6 contain the empirical results. Table 4.1 offers a road map to the presentation of those and all other results in the book. That table summarizes all the hypotheses developed in the previous chapter. It notes the sources of the hypotheses, their relevance in differentiating between Schumpeterian and neoclassical paradigms, and the section of the book in which each hypothesis is examined empirically. Section 4.3 examines which theories of trade can best explain the types of goods in which CPEs specialize. For organizational purposes, I divide the remainder of the results into three sections , each focusing on a different aspect of economic activity. Section 4.4 explores the way economic system interacts with technological characteristics to affect trade patterns. Section 4.5 asks whether the trade of CPEs reflects the properties of the markets in which goods are sold. And Section 4.6 focuses on the link between CPE trade and the properties of goods, including the effect of systemic differences in preferences for specific commodities. 4.1. Measures of Economic Performance Based on Trade Statistics Alone As throughout this book, the basis of the analysis here is the relation between the trade performance of a country and the characteristics of its domestic economy. Sometimes those characteristics describe fundamental features of a country's economic system. For example, Holzman (1979) has suggested that CPEs tend to breed managerial personnel who have little ability for salesmanship and that this fact is reflected in trade patterns.3 An empirical examination of Holzman's theory would therefore be valuable in furthering one's understanding of the nature of CPES. However, formal econometric testing 3 Salesmanship is one variety of human...


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