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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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Bibliographic Info

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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  1. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage: A Quantitative Approach," Working Papers 13-2008, Singapore Management University, School of Economics.
  2. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
  3. Costinot, Arnaud, 2007. "On the Origins of Comparative Advantage," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt07g7g8h8, Department of Economics, UC San Diego.
  4. Alan V. Deardorff, 2005. "How Robust is Comparative Advantage?," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 1004-1016, November.
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  8. Kiminori Matsuyama, 2004. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1389, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  12. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
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  17. Ghironi, Fabio & Melitz, Marc, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," Scholarly Articles 3228377, Harvard University Department of Economics.
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Citations

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Cited by:
  1. James E Anderson, James E; Yotov, Yoto V., 2010. "Specialisation: Pro and Anti-Globalizing 1990-2002," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 15, Competitive Advantage in the Global Economy (CAGE).
  2. Chen, Natalie & Novy, Dennis, 2008. "International Trade Integration: A Disaggregated Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7103, C.E.P.R. Discussion Papers.
  3. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage : A Quantitative Approach," Macroeconomics Working Papers 22071, East Asian Bureau of Economic Research.
  4. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  5. Christian Hepenstrick, 2010. "Per-capita incomes and the extensive margin of bilateral trade," IEW - Working Papers 519, Institute for Empirical Research in Economics - University of Zurich.
  6. Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-48, August.
  7. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
  8. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  9. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," NBER Working Papers 14645, National Bureau of Economic Research, Inc.
  10. Sergei Koulayev, 2009. "Estimating demand in search markets: the case of online hotel bookings," Working Papers, Federal Reserve Bank of Boston 09-16, Federal Reserve Bank of Boston.
  11. Amoroso, Nicolás & Chiquiar, Daniel & Ramos-Francia, Manuel, 2011. "Technology and endowments as determinants of comparative advantage: Evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 164-196, August.
  12. Morrow, Peter M., 2010. "Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence," Journal of International Economics, Elsevier, vol. 82(2), pages 137-151, November.

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