Manufacturing and Agricultural Production Functions and International Trade: United States and Northern Europe
1966
Zarembka, Paul
The usefulness of the production possibility curve for the empirical testing of international trade theory is demonstrated. Agricultural and manufacturing production functions are estimated for the United States and Northern Europe by use of techniques suggested by Griliches. The estimates show decreasing returns to capital and labor in agriculture and approximately constant returns in manufacturing. These estimates of the production function are used to derive production possibility curves for the United States and West Germany. International trade theory leads to the conclusion that the United States has, vis‐à‐vis West Germany, a comparative advantage in the relatively capital‐intensive farming and a comparative disadvantage in the relatively labor‐intensive manufacturing.
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