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The Location of Comparative Advantages on the Basis of Fundamentals Only

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  • Pierre Mohnen

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  • Thijs Ten Raa

Abstract

We locate the comparative advantages of Canada and Europe on the basis of their fundamentals only: endowments, technologies, and preferences. A linear program with an input-output core and an algorith for the balance of payments constraint will determine the efficient allocation of resources. The supporting allocations determine the optimum pattern of trade. The Canadian advantage compared to Europe is in minerals, machines and clothing & footwear. Gains to free bilateral trade are estimated to be negligible for the big economy, Europe, but significant for the small one, Canada. The pattern of comparative advantage persists when we allowfor free access to technology and consumption coefficients and, therefore, can be ascribed to the endowments. Nous détectons les avantages comparatifs au Canada et en Europe à partir des éléments fondamentaux d'une économie : les dotations, les technologies et les préférences. Par la programmation linéaire, en utilisant les tableaux entrée-sortie et un algorithme servant à imposer l'équilibre de la balance commerciale, nous déterminons l'allocation optimale des ressources, qui sous-tend les échanges optimaux. Le Canada a un avantage comparatif par rapport à l'Europe dans les miéraux, la machineries, les vêtements et les chaussures. Les gains à l'échange sont minimes pour la grande économie, l'Europe,0501s substantiels pour le petit pays, le Canada. La structure des avantages comparatifs persiste quand nous permettons le libre choix entre les technologies et les préférences des deux pays. Les dotations ressortent donc comme étant le facteur déterminant de la structure des avantages comparatifs.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 97s-07.

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Date of creation: 01 Feb 1997
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Handle: RePEc:cir:cirwor:97s-07

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Keywords: Comparative advantage; Gains to free trade; Avantages comparatifs; gains au libre-échange;

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Citations

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Cited by:
  1. Alex Hoen & Jan Oosterhaven, 2006. "On the measurement of comparative advantage," The Annals of Regional Science, Springer, vol. 40(3), pages 677-691, August.
  2. Thijs Raa & Victoria Shestalova, 2011. "The Solow residual, Domar aggregation, and inefficiency: a synthesis of TFP measures," Journal of Productivity Analysis, Springer, vol. 36(1), pages 71-77, August.
  3. Kagawa, Shigemi, 2008. "How does Japanese compliance with the Kyoto Protocol affect environmental productivity in China and Japan?," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 173-188, June.
  4. ten Raa, Thijs & Pan, Haoran, 2005. "Competitive pressures on China: Income inequality and migration," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 671-699, November.
  5. Prieto, Angel M. & Zofio, Jose L., 2007. "Network DEA efficiency in input-output models: With an application to OECD countries," European Journal of Operational Research, Elsevier, vol. 178(1), pages 292-304, April.
  6. Sahoo, A., 2008. "Essays on the Indian Economy: Competitive Pressure, Productivity and Performance," Open Access publications from Tilburg University urn:nbn:nl:ui:12-373280, Tilburg University.
  7. Raa, T. ten & Mohnen, P., 1996. "The location of comparative advantages on the basis of fundamentals only," Discussion Paper 1996-81, Tilburg University, Center for Economic Research.
  8. Victoria Shestalova, 2001. "General Equilibrium Analysis of International TFP Growth Rates," Economic Systems Research, Taylor & Francis Journals, vol. 13(4), pages 391-404.
  9. Shu-hen Chiang, 2009. "Location quotient and trade," The Annals of Regional Science, Springer, vol. 43(2), pages 399-414, June.

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