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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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References

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  1. Fabio Ghironi & Marc J. Melitz, 2004. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," Boston College Working Papers in Economics 599, Boston College Department of Economics.
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  13. Peter M. Morrow, 2008. "East is East and West is West: A Ricardian-Heckscher-Ohlin Model of Comparative Advantage," Working Papers 575, Research Seminar in International Economics, University of Michigan.
  14. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
  15. Alan V Deardorff, 2004. "Local Comparative Advantage: Trade Costs and the Pattern of Trade," Working Papers 500, Research Seminar in International Economics, University of Michigan.
  16. Alan V. Deardorff, 2005. "How Robust is Comparative Advantage?," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 1004-1016, November.
  17. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
  18. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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Cited by:
  1. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," Econometrica, Econometric Society, vol. 77(4), pages 1165-1192, 07.
  2. Natalie Chen & Dennis Novy, 2009. "International Trade Integration: A Disaggregated Approach," CESifo Working Paper Series 2595, CESifo Group Munich.
  3. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage : A Quantitative Approach," Macroeconomics Working Papers 22071, East Asian Bureau of Economic Research.
  4. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  5. Shikher, Serge, 2011. "Capital, technology, and specialization in the neoclassical model," Journal of International Economics, Elsevier, vol. 83(2), pages 229-242, March.
  6. Costinot, Arnaud, 2007. "On the Origins of Comparative Advantage," University of California at San Diego, Economics Working Paper Series qt07g7g8h8, Department of Economics, UC San Diego.
  7. Matilde Bombardini & Giovanni Gallipoli & Germán Pupato, 2009. "Skill Dispersion and Trade Flows," NBER Working Papers 15097, National Bureau of Economic Research, Inc.
  8. James E Anderson, James E; Yotov, Yoto V., 2010. "Specialisation: Pro and Anti-Globalizing 1990-2002," CAGE Online Working Paper Series 15, Competitive Advantage in the Global Economy (CAGE).
  9. Hepenstrick, Christian & Tarasov, Alexander, 2012. "Per capita income and the extensive margin of bilateral trade," Discussion Papers in Economics 14231, University of Munich, Department of Economics.
  10. 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.
  11. 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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