Empirical Relevance of the Hillman Condition and Comparative Advantage

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Empirical Relevance of the Hillman Condition and Comparative Advantage

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Jeroen Hinloopen () (Faculty of Economics and Econometrics, Universiteit van Amsterdam)
Charles van Marrewijk () (Faculty of Economics, Erasmus Universiteit Rotterdam)

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Abstract

We analyze the empirical violation of the Hillman condition, a necessary and sufficient condition for the correspondence between comparative advantage and pre-trade relative prices. Our comprehensive data set allows us to investigate the Hillman condition for virtually all countries of the world, over an extended period of time, for many sectors, and for different levels of aggregation. Violations of the Hillman condition are small as a share of the number of observations, but can be substantial as a share of the value of world exports. Measured either way, violations occurred much more frequently in the 1970s and early 1980s, a difference mostly caused by the two oil crises. As the condition is useful for identifying various anomalies, we argue that it should be included as a standard diagnostic test for empirical studies into comparative advantage.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-019/2.

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Date of creation: 10 Feb 2004
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Handle: RePEc:dgr:uvatin:20040019

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Find related papers by JEL classification:
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F20 - International Economics - - International Factor Movements and International Business - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-10-21 (All new papers)
NEP-MIC-2004-04-25 (Microeconomics)

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Imre Fert– & L. J. Hubbard, 2003. "Revealed Comparative Advantage and Competitiveness in Hungarian Agri-Food Sectors," The World Economy, Blackwell Publishing, vol. 26(2), pages 247-259, 02. [Downloadable!] (restricted)
Arye Hillman, 1980. "Observations on the relation between “revealed comparative advantage” and comparative advantage as indicated by pre-trade relative prices," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(2), pages 315-321, June. [Downloadable!] (restricted)
Štefan Bojnec, 2001. "Trade and Revealed Comparative Advantage Measures: Regional and Central and East European Agricultural Trade," Eastern European Economics, M.E. Sharpe, Inc., vol. 39(2), pages 72-98, March. [Downloadable!] (restricted)

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