Institute for Research on Labor and Employment

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.