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What Good Do Countries Trade? New Ricardian Predictions

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  • Costinot, Arnaud
  • Komunjer, Ivana

Abstract

Though one of the pillars of the theory of international trade, the extreme predictions of the Ricardian model have made it unsuitable for empirical purposes. A seminal contribution of Eaton and Kortum (2002) is to demonstrate that random productivity shocks are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important questions: What goods to countries trade? Our main contribution is to generalize their approach and provide and empirically meaningful answer to this question.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt9t9818ng.

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Date of creation: 01 Oct 2006
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Handle: RePEc:cdl:ucsdec:qt9t9818ng

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Keywords: Random Productivity Shocks; Ricardian Comparative Advantage; Predictions of Trade Patterns;

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  21. Golub, Stephen S & Hsieh, Chang-Tai, 2000. "Classical Ricardian Theory of Comparative Advantage Revisited," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 221-34, May.
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