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Complexity as a source of comparative advantage

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Author Info

  • Asier Minondo

    () (Deusto Business School - University of Deusto)

  • Francisco Requena

    () (University of Valencia)

Abstract

This paper analyzes whether complexity, measured by the number of skilled tasks that are performed simultaneously in production, explains countries' commodity trade structure. We modify Romalis (2004) model to incorporate differences in complexity across commodities together with differences in average skills across countries and monopolistic competition. Our model predicts that the share of developed countries in world trade increases with products' complexity. The empirical tests confirm this prediction. Moreover, complexity seems to provide a better explanation of countries' commodity trade structure than the one offered only by skill intensity.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1214.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1214.

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Length: 27 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:eec:wpaper:1214

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Keywords: complexity; skill-intensity; factor proportions; trade structure; specialization.;

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References

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  1. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  2. Justin Pierce & Peter Schott, 2009. "A Concordance Between Ten-Digit U.S. Harmonized System Codes and SIC/NAICS Product Classes and Industries," Working Papers 09-41, Center for Economic Studies, U.S. Census Bureau.
  3. Arnaud Costinot & Lindsay Oldenski & James Rauch, 2011. "Adaptation and the Boundary of Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 298-308, February.
  4. 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.
  5. Morrow, Peter M., 2010. "Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence," Journal of International Economics, Elsevier, vol. 82(2), pages 137-151, November.
  6. Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, Economic & Financial Publishing, PO Box 69, Henley-on-Thames, Oxfordshire, United Kingdom, RG9 1GB, vol. 10(2), pages 41-78, April.
  7. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
  8. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  9. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  10. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  11. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  12. Niven Winchester & David Greenaway & Geoffrey V. Reed, 2006. "Skill Classification and the Effects of Trade on Wage Inequality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 287-306, July.
  13. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
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