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Can Comparative Advantage Explain the Growth of us Trade?

Author

Listed:
  • Alejandro Cuñat
  • Marco Maffezzoli

Abstract

We present a dynamic comparative advantage model in which moderate reductions in import tariffs can generate sizable increases in trade volumes over time. A fall in tariffs has two effects. First, for given factor endowments, it raises the degree of specialisation, leading to a larger volume of trade in the short run. Second, it raises the factor price of each country's abundant factor, leading to diverging paths of relative factor endowments and a rising degree of specialisation. A simulation exercise shows that a fall in tariffs produces a disproportional increase in the trade share of output as in the data. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Suggested Citation

  • Alejandro Cuñat & Marco Maffezzoli, 2007. "Can Comparative Advantage Explain the Growth of us Trade?," Economic Journal, Royal Economic Society, vol. 117(520), pages 583-602, April.
    • Handle: RePEc:ecj:econjl:v:117:y:2007:i:520:p:583-602
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    Cited by:

    1. Yonghyup Oh & Wonho Song, 2008. "Sub-Prime Financial Crisis and US Policy Choices," Finance Working Papers 22995, East Asian Bureau of Economic Research.
    2. Auer, Raphael A., 2017. "Product heterogeneity, cross-country taste differences, and the growth of world trade," European Economic Review, Elsevier, vol. 100(C), pages 1-27.
    3. Andrea Ingianni, 2012. "Intra-European Union trade openness and new members’ output convergence: A time-series analysis," Economics Discussion Papers 2012-5, School of Economics, Kingston University London.
    4. Zymek, Robert, 2015. "Factor proportions and the growth of world trade," Journal of International Economics, Elsevier, vol. 95(1), pages 42-53.
    5. Auer, Raphael A., 2015. "Human capital and the dynamic effects of trade," Journal of Development Economics, Elsevier, vol. 117(C), pages 107-118.
    6. Raphael A. Auer, 2010. "Consumer Heterogeneity and the Impact of Trade Liberalization: How Representative is the Representative Agent Framework?," Working Papers 2010-13, Swiss National Bank.
    7. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    8. Raphael Auer, 2009. "Product Heterogeneity, Within-Industry Trade Patterns, and the Home Bias of Consumption?," Working Papers 09.05, Swiss National Bank, Study Center Gerzensee.
    9. Surender Kumar & Prerna Prabhakar, 2020. "Industrial energy prices and export competitiveness: evidence from India," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 1-20, January.
    10. Raphael A. Auer, 2013. "Product Heterogeneity, Cross-Country Taste Differences, and the Consumption Home Bias," Working Papers 13.01, Swiss National Bank, Study Center Gerzensee.
    11. Alejandro Cunat & Szabolcs Deak & Marco Maffezzoli, 2022. "Tax Cuts in Open Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 83-108, July.
    12. Cuñat Alejandro & Maffezzoli Marco, 2007. "Specialization Patterns and the Factor Bias of Technology," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-27, July.
    13. William F. Lincoln & Andrew H. McCallum, 2011. "Entry Costs & Increasing Trade," William Davidson Institute Working Papers Series wp1024, William Davidson Institute at the University of Michigan.
    14. Anderson, James E. & Larch, Mario & Yotov, Yoto V., 2019. "Trade and investment in the global economy: A multi-country dynamic analysis," European Economic Review, Elsevier, vol. 120(C).
    15. Philip Sauré, 2007. "Productivity Growth, Bounded Marginal Utility, and Patterns of Trade," Economics Working Papers ECO2007/56, European University Institute.
    16. Philip Sauré, 2012. "Bounded Love of Variety and Patterns of Trade," Open Economies Review, Springer, vol. 23(4), pages 645-674, September.
    17. Fuxiang Wu & Zhibiao Liu, 2010. "Microeconomic Analysis on the Growth of Trade Volume in China: 1978–2007," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 5(2), pages 299-324, June.
    18. Immaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Sebastian Vollmer, 2007. "Competitiveness – A Comparison of China and Mexico," CESifo Working Paper Series 2111, CESifo.
    19. Michael Sposi & Kei-Mu Yi & Jing Zhang, 2021. "Trade Integration, Global Value Chains, and Capital Accumulation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(3), pages 505-539, September.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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