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Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence

Author

Listed:
  • Arnaud Costinot
  • Dave Donaldson

Abstract

When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. In this paper we develop and implement an empirical test of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. We find that a regression of log observed output on log predicted output has a (precisely estimated) slope of 0.84 and an R-squared of 0.93. In our view, these findings offer considerable support for Ricardo's ideas.

Suggested Citation

  • Arnaud Costinot & Dave Donaldson, 2012. "Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence," American Economic Review, American Economic Association, vol. 102(3), pages 453-458, May.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:453-58
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.453
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    References listed on IDEAS

    as
    1. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," Econometrica, Econometric Society, vol. 77(4), pages 1165-1192, July.
    2. Nathan Nunn & Nancy Qian, 2011. "The Potato's Contribution to Population and Urbanization: Evidence From A Historical Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 593-650.
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    Citations

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    Cited by:

    1. Jorge Morales Meoqui, 2017. "Ricardo's Numerical Example Versus Ricardian Trade Model: a Comparison of Two Distinct Notions of Comparative Advantage," Economic Thought, World Economics Association, vol. 6(1), pages 35-55, March.
    2. Helen Scharber & Anita Dancs, 2016. "Do locavores have a dilemma? Economic discourse and the local food critique," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 33(1), pages 121-133, March.
    3. repec:bla:kyklos:v:70:y:2017:i:3:p:425-455 is not listed on IDEAS
    4. Diego Restuccia & Tasso Adamopoulos, 2017. "Geography and Agricultural Productivity: Cross-Country Evidence from Micro Plot-Level Data," 2017 Meeting Papers 1180, Society for Economic Dynamics.
    5. Cecilia Bellora & Jean-Marc Bourgeon, 2014. "Agricultural Trade, Biodiversity Effects and Food Price Volatility," Working Papers hal-00969083, HAL.
    6. repec:oup:erevae:v:44:y:2017:i:4:p:592-633. is not listed on IDEAS
    7. repec:aea:aejmic:v:9:y:2017:i:3:p:28-62 is not listed on IDEAS
    8. Hausmann, Ricardo & Hidalgo, Cesar A. & Stock, Daniel P. & Yildirim, Muhammed A., 2014. "Implied Comparative Advantage," Working Paper Series rwp14-003, Harvard University, John F. Kennedy School of Government.
    9. Cecilia Bellora & Jean-Marc Bourgeon, 2016. "Food trade, Biodiversity Effects and Price Volatility," Working Papers 2016-06, CEPII research center.
    10. Asier Minondo, 2016. "Fundamental comparative advantage versus random talent: An analysis using chess data," Working Papers 1605, Department of Applied Economics II, Universidad de Valencia.
    11. repec:oup:rfinst:v:30:y:2017:i:5:p:1539-1582. is not listed on IDEAS
    12. Laurent Frésard & Ulrich Hege & Gordon Phillips, 2017. "Extending Industry Specialization through Cross-Border Acquisitions," Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1539-1582.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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