Financial Markets, the Pattern of Industrial Specialization and Comparative Advantage: Evidence from OECD Countries

Due to underlying technological and organizational di erences, industries di er in their need for external ÿnance. Since services provided by the ÿnancial sector are largely immobile across countries, the pattern of industrial specialization should be in uenced by the level of ÿnancial development. Among OECD countries we ÿnd a strong causal e ect of the ÿnancial sector on industrial specialization. Further, the ÿnancial sector is a source of comparative advantage in a way consistent with the Hecksher–Ohlin–Vanek model. Results are also presented on which aspects of ÿnancial systems are important for specialization and comparative advantage.