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Relative Prices and Empirical Trade Patterns

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  • Nazif Durmaz
  • Henry Thompson

Abstract

This paper examines empirical links between relative prices and bilateral trade based on constant cost trade theory. The global models are built from the World Input-Output Database WIOD aggregated to three, four, and five regions and goods. The simple model assumes relative labor shares are relative prices and average relative price is the terms of trade. Trade patterns are complex among partially specialized regions. Model predictions are compared to observed net exports in seven different aggregations. Regression analysis also examines the effects of relative prices on the total bilateral net exports across models.

Suggested Citation

  • Nazif Durmaz & Henry Thompson, 2020. "Relative Prices and Empirical Trade Patterns," Auburn Economics Working Paper Series auwp2020-06, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2020-06
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    File URL: https://cla.auburn.edu/econwp/Archives/2020/2020-06.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    relative prices; comparative advantage; trade patterns; partial specialization;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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