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

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  • Daniel Bernhofen

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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  • Daniel Bernhofen, 2009. "Predicting the pattern of international trade in the neoclassical model: a synthesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 5-21, October.
    • Handle: RePEc:spr:joecth:v:41:y:2009:i:1:p:5-21
    DOI: 10.1007/s00199-008-0392-2
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    1. Daniel Bernhofen, 2007. "Predicting the Factor Content of Foreign Trade: Theory and Evidence," Discussion Papers 07/11, University of Nottingham, GEP.
    2. Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
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    4. 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.
    5. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
    6. Daniel M. Bernhofen, 2007. "On the Magic Behind David Ricardo's Four Mystical Numbers," Discussion Papers 07/02, University of Nottingham, GEP.
    7. Selten, Reinhard, 1991. "Properties of a measure of predictive success," Mathematical Social Sciences, Elsevier, vol. 21(2), pages 153-167, April.
    8. Alan V. Deardorff, 2011. "The General Validity of the Law of Comparative Advantage," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 10, pages 73-90, World Scientific Publishing Co. Pte. Ltd..
    9. 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.
    10. J. Peter Neary & Albert G. Schweinberger, 1986. "Factor Content Functions and the Theory of International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(3), pages 421-432.
    11. Lai, Huiwen & Zhu, Susan Chun, 2007. "Technology, endowments, and the factor content of bilateral trade," Journal of International Economics, Elsevier, vol. 71(2), pages 389-409, April.
    12. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-459, June.
    13. 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.
    14. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
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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. 119(1), pages 71-94.
    2. Kazuhiro Kurose & Naoki Yoshihara, 2018. "The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem," Working Papers SDES-2018-17, Kochi University of Technology, School of Economics and Management, revised Nov 2018.
    3. Daniel Bernhofen & Raymond Riezman, 2009. "Introduction: ‘New directions in international trade theory’," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 1-3, October.
    4. Zhong, Weiqiong & An, Haizhong & Shen, Lei & Dai, Tao & Fang, Wei & Gao, Xiangyun & Dong, Di, 2017. "Global pattern of the international fossil fuel trade: The evolution of communities," Energy, Elsevier, vol. 123(C), pages 260-270.
    5. Kurose, Kazuhiro & Yoshihara, Naoki, 2018. "The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem," Discussion Paper Series 686, Institute of Economic Research, Hitotsubashi University.

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    More about this item

    Keywords

    Predictability; Pattern of trade; Neoclassical model; B10; F11;
    All these keywords.

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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