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

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  • 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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    JEL classification:

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

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