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Predicting the pattern of international trade in the neoclassical model: a synthesis

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  • Daniel Bernhofen

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Abstract

I propose a framework that takes a set of conceivable outcomes as the primitive and a prediction is defined by identifying a subset on the set of conceivable outcomes. This notion of predictability serves as an organizing principle for characterizing pattern of trade predictions in single economy and integrated equilibrium formulations of the neoclassical trade model. I identify allocative efficiency as the unifying subset selection criterion for the different formulations of the neoclassical trade model, ranging from Ricardo’s (1817) original comparative advantage formulation to the multi-cone Heckscher-Ohlin specification with multiple countries, goods and factors.

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File URL: http://hdl.handle.net/10.1007/s00199-008-0392-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 41 (2009)
Issue (Month): 1 (October)
Pages: 5-21

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Handle: RePEc:spr:joecth:v:41:y:2009:i:1:p:5-21

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Related research

Keywords: Predictability; Pattern of trade; Neoclassical model; B10; F11;

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References

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  1. Brecher, Richard A. & Choudhri, Ehsan U., 1982. "The factor content of international trade without factor-price equalization," Journal of International Economics, Elsevier, vol. 12(3-4), pages 277-283, May.
  2. Richard A. Brecher & Ehsan U. Choudhri, 1993. "Some Empirical Support for the Heckscher-Ohlin Model of Production," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 272-85, May.
  3. Daniel M. Bernhofen & John C. Brown, 2004. "A Direct Test of the Theory of Comparative Advantage: The Case of Japan," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 48-67, February.
  4. Yong_Seok Choi & Pravin Krishna, 2000. "The Factor Content of Bilateral Trade:an Empirical Test," Working Papers 2000-11, Brown University, Department of Economics.
  5. Selten,Reinhard, . "Properties of a measure of predictive succes," Discussion Paper Serie B 130, University of Bonn, Germany.
  6. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
  7. Deardorff, Alan V, 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 941-57, October.
  8. Neary, J Peter & Schweinberger, Albert G, 1984. "Factor Content Functions and the Theory of International Trade," CEPR Discussion Papers 3, C.E.P.R. Discussion Papers.
  9. Daniel Bernhofen, . "Predicting the Factor Content of Foreign Trade: Theory and Evidence," Discussion Papers 07/11, University of Nottingham, GEP.
  10. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
  11. Daniel M. Bernhofen, . "On the Magic Behind David Ricardo's Four Mystical Numbers," Discussion Papers 07/02, University of Nottingham, GEP.
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Cited by:
  1. Demmou Lilas, 2009. "Déterminants et nature des spécialisations Nord-Sud : quelques enseignements tirés de la littérature empirique," Revue d'économie politique, Dalloz, vol. 0(1), pages 71-94.
  2. Daniel Bernhofen & Raymond Riezman, 2009. "Introduction: ‘New directions in international trade theory’," Economic Theory, Springer, vol. 41(1), pages 1-3, October.

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