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Can Comparative Advantage Explain the Growth of us Trade?

  • Alejandro Cuñat
  • Marco Maffezzoli

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.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 520 (04)
Pages: 583-602

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:520:p:583-602
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