Working Papers

Property Rights, Mobile Capital, and Comparative Advantage


Recent papers show that imperfect property rights to a natural resource–a sector-specific factor–can be a source of comparative advantage. in these models, weaker property rights attract labor–the only mobile factor–to the resource sector, increasing the country’s comparative advantage for that sector. If capital in addition to labor is mobile, and if the benefits of capital are non-excludable or if the degree of property rights is endogenous, a deterioration of property rights has ambiguous effects on comparative advantage and on the equilibrium wage-rental ratio.