Exporting Manufactures: Trade Policy or Human Resources?

Abstract

Whether a country exports manufactures or primary products is determined mainly by the skill level of its labour force, relative to the extent of its natural resources. This proposition is derived from a modified version of Heckscher-Ohlin theory, and strongly supported by econometric evidence. Variation in trade policies currently accounts for only a small part of the cross-country variation in the relative importance of manufactured exports. These findings have important implications for development strategy advice.