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The location of comparative advantages on the basis of fundamentals only

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  • Raa, T. ten
  • Mohnen, P.

    (Tilburg University, Center for Economic Research)

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.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1996-81.

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Date of creation: 1996
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Handle: RePEc:dgr:kubcen:199681

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Keywords: comparative advantage;

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References

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  1. W.E. Diewert & Catherine J. Morrison, 1985. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," NBER Working Papers 1564, National Bureau of Economic Research, Inc.
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  8. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
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  10. Krueger, Anne O., 1984. "Trade policies in developing countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 11, pages 519-569 Elsevier.
  11. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
  12. Leamer, E. & Levingsohn, J., 1994. "International Trade Theory: The Evidence," Working Papers 368, Research Seminar in International Economics, University of Michigan.
  13. Pierre Mohnen & Thijs Ten Raa, 1997. "The Location of Comparative Advantages on the Basis of Fundamentals Only," CIRANO Working Papers 97s-07, CIRANO.
  14. Chipman, John S & Tian, Guoqiang, 1992. "A General-Equilibrium Intertemporal Model of an Open Economy," Economic Theory, Springer, vol. 2(2), pages 215-46, April.
  15. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
  16. Raa, M.H. ten & Kop Jansen, P., 1990. "The choice of model in the construction of input-output coefficients matrices," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381948, Tilburg University.
  17. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  18. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  19. Jansen, Pieter Kop & ten Raa, Thijs, 1990. "The Choice of Model in the Construction of Input-Output Coefficients Matrices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 213-27, February.
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Citations

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Cited by:
  1. 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.
  2. Victoria Shestalova, 2001. "General Equilibrium Analysis of International TFP Growth Rates," Economic Systems Research, Taylor & Francis Journals, vol. 13(4), pages 391-404.
  3. Hoen, Alex R., 2001. "On the measurement of comparative advantage," Research Report 04C11, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  4. 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.
  5. Pierre Mohnen & Thijs Ten Raa, 1997. "The Location of Comparative Advantages on the Basis of Fundamentals Only," CIRANO Working Papers 97s-07, CIRANO.
  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. 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.
  8. Shu-hen Chiang, 2009. "Location quotient and trade," The Annals of Regional Science, Springer, vol. 43(2), pages 399-414, June.
  9. 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.

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