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Can Comparative Advantage Explain the Growth of us Trade?

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Author Info
Alejandro Cuñat
Marco Maffezzoli

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Abstract

We present a dynamic comparative advantage model in which moderate reductions in import tariffs can generate sizable increases in trade volumes over time. A fall in tariffs has two effects. First, for given factor endowments, it raises the degree of specialisation, leading to a larger volume of trade in the short run. Second, it raises the factor price of each country's abundant factor, leading to diverging paths of relative factor endowments and a rising degree of specialisation. A simulation exercise shows that a fall in tariffs produces a disproportional increase in the trade share of output as in the data. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2007.02042.x
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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 520 (04)
Pages: 583-602
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Handle: RePEc:ecj:econjl:v:117:y:2007:i:520:p:583-602

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Cited by:
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  1. Felicitas Nowak-Lehmann D. & Sebastian Vollmer & Inmaculada Martinez-Zarzoso, 2008. "Does Comparative Advantage Make Countries Competitive? A Comparison of China and Mexico," cege – Center for European, Governance and Economic Development Research Discussion Papers 74, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
  2. Alejandro Cuñat & Szabolcs Deák & Marco Maffezzoli, 2008. "Tax Cuts in Open Economies," Working Papers 332, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  3. repec:bep:maccon:v:7:y:2007:i:1:p:1574-1574 is not listed on IDEAS
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