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Comparative Advantage, Geographic Advantage, and the Volume of Trade

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  • James E. Rauch

Abstract

A functional relationship between the degree of a country?s comparative advantage in any good and the volume of its net exports of that good to its trading partner is established using a model with per-unit-distance transportation costs between countries' coasts and their interiors. The greater a country's comparative advantage, the greater the transportation cost it can overcome and hence the deeper its exports can penetrate geographically into its trading partner. The internal spatial structure of a country is modeled using cities as the basic spatial units. It is shown that the city closest to the coast will be the largest and have the highest wage rate and residential rental rates, and that population sizes, wage rates, and residential rental rates of cities all fall as one moves inland.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3512.

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Date of creation: Nov 1990
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Publication status: published as Economic Journal, Vol. 101, pp. 1230-1244, (September 1991).
Handle: RePEc:nbr:nberwo:3512

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  1. Patricia E. Beeson & Randall W. Eberts, 1987. "Identifying amenity and productivity cities using wage and rent differentials," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 16-25.
  2. Starrett, David A., 1974. "Principles of optimal location in a large homogeneous area," Journal of Economic Theory, Elsevier, vol. 9(4), pages 418-448, December.
  3. Rauch, James E., 1989. "Increasing returns to scale and the pattern of trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 359-369, May.
  4. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
  5. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, vol. 9(2), pages 197-209, May.
  6. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
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Cited by:
  1. A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
  2. Olga Alonso-Villar, 2000. "Large metropolises in the Third World: an explanation," Working Papers 0004, Universidade de Vigo, Departamento de Economía Aplicada.
  3. Mayer, T., 1999. "Spatial Cournot Competition and Heterogeneous Production Costs Across Locations," Papiers d'Economie Mathématique et Applications 1999.89, Université Panthéon-Sorbonne (Paris 1).
  4. Dimitris Kallioras & George Petrakos & Maria Tsiapa & Lefteris Topaloglou, 2011. "The Determinants of Growth in EU Border Regions," ERSA conference papers ersa10p702, European Regional Science Association.
  5. Akhter, Syed H., 2004. "Is globalization what it's cracked up to be? Economic freedom, corruption, and human development," Journal of World Business, Elsevier, vol. 39(3), pages 283-295, August.
  6. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  7. Barjak, Franz & Heimpold, Gerhard, 1999. "Development Problems and Policies at the German Border with Poland," ERSA conference papers ersa99pa136, European Regional Science Association.
  8. Stephen J. Redding, 2012. "Goods Trade, Factor Mobility and Welfare," CEP Discussion Papers dp1140, Centre for Economic Performance, LSE.
  9. Marius Brülhart, 2011. "The spatial effects of trade openness: a survey," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(1), pages 59-83, April.
  10. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
  11. Ezcurra, Roberto & Rodríguez-Pose, Andrés, 2013. "Does economic globalization a ffect regional inequality? A cross-country analysis," CEPR Discussion Papers 9557, C.E.P.R. Discussion Papers.
  12. Lefteris Topaloglou & George Petrakos, 2006. "The New Economic Geography of the Northern Greek Border Regions," ERSA conference papers ersa06p456, European Regional Science Association.
  13. Cem Karayalcin & Hakan Yilmazkuday, 2014. "Trade and Cities," Working Papers 1408, Florida International University, Department of Economics.
  14. Niebuhr, Annekatrin & Stiller, Silvia, 2002. "Integration effects in border regions - a survey of economic theory and empirical studies," ERSA conference papers ersa02p066, European Regional Science Association.
  15. Hanson, Gordon H, 1998. "North American Economic Integration and Industry Location," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 30-44, Summer.

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