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What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas

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  • Arnaud Costinot
  • Dave Donaldson
  • Ivana Komunjer

Abstract

The Ricardian model predicts that countries should produce and export relatively more in industries in which they are relatively more productive. Though one of the most celebrated insights in the theory of international trade, this prediction has received little attention in the empirical literature since the mid-1960s. The main reason behind this lack of popularity is the absence of clear theoretical foundations to guide the empirical analysis. Building on the seminal work of Eaton and Kortum ("Technology, Geography, and Trade", Econometrica, 70, 1741--1779 2002), we offer such foundations and use them to quantify the importance of Ricardian comparative advantage. In the process, we also provide a theoretically consistent alternative to Balassa's (1965, "An Empirical Demonstration of Classical Comparative Cost Theory", Review of Economics and Statistics, 45, 231--238) well-known index of "revealed comparative advantage". Copyright 2012, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 2 ()
Pages: 581-608

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Handle: RePEc:oup:restud:v:79:y:2012:i:2:p:581-608

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Whither Ricardian comparative advantage?
    by jdingel in Trade Diversion on 2011-06-08 17:40:23
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Cited by:
  1. Daniel M. Bernhofen, . "The Empirics of General Equilibrium Trade Theory: What Have We Learned?," Discussion Papers 10/24, University of Nottingham, GEP.
  2. Julian di Giovanni & Andrei A. Levchenko, 2012. "The Risk Content of Exports: A Portfolio View of International Trade," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 8(1), pages 97 - 151.
  3. Jing Zhang & Andrei A. Levchenko, 2011. "The Evolution of Comparative Advantage: Measurement and Welfare Implications," 2011 Meeting Papers 302, Society for Economic Dynamics.
  4. Natalia Ramondo, 2012. "Increasing Returns and Economics Prosperity: How Can Size not Matter?," 2012 Meeting Papers 143, Society for Economic Dynamics.
  5. Elizaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," FIW Working Paper series 095, FIW.
  6. Trevor Tombe, 2010. "The Missing Food Problem: How Low Agricultural Imports Contribute to International Income and Productivity Differences," Working Papers tecipa-416, University of Toronto, Department of Economics.
  7. Jonathan Vogel & Javier Cravino & Ariel Burstein, 2011. "Importing Skill-Biased Technology," 2011 Meeting Papers 440, Society for Economic Dynamics.
  8. Stephen J. Redding, 2012. "Goods Trade, Factor Mobility and Welfare," NBER Working Papers 18008, National Bureau of Economic Research, Inc.
  9. Demian Calin-Vlad, 2013. "Eu enlargement and the gains from trade," FIW Working Paper series 108, FIW.

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