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A world trade model with bilateral trade based on comparative advantage

Author

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  • Anders Hammer Strømman
  • Faye Duchin

Abstract

This paper describes an extension of Duchin's world trade model to include the explicit representation of transportation costs, permitting the endogenous determination of bilateral trade flows and region-specific prices. The original model is a linear program that, based on comparative advantage and the minimization of factor use, determines regional production and trade flows as well as world prices and scarcity rents for m regions, n good, and k factors. The new world trade model with bilateral trade achieves its objectives by introducing transportation services and geographically dependent transportation requirements for each traded good and each pair of potential trade partners. The formulation of this model and its major properties are presented, and results from a preliminary analysis with 11 regions, eight goods, four transportation sectors, and six factors of production are reported and compared with corresponding results from the world trade model. On the basis of this comparison, we conclude that transportation costs have little impact on a region's total imports or exports of a given commodity.

Suggested Citation

  • Anders Hammer Strømman & Faye Duchin, 2006. "A world trade model with bilateral trade based on comparative advantage," Economic Systems Research, Taylor & Francis Journals, vol. 18(3), pages 281-297.
  • Handle: RePEc:taf:ecsysr:v:18:y:2006:i:3:p:281-297
    DOI: 10.1080/09535310600844300
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    References listed on IDEAS

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    1. Faye Duchin, 2005. "A world trade model based on comparative advantage with m regions, n goods, and k factors," Economic Systems Research, Taylor & Francis Journals, vol. 17(2), pages 141-162.
    2. Leontief, Wassily, 1977. "The future of the world economy+," Socio-Economic Planning Sciences, Elsevier, vol. 11(3), pages 171-182.
    3. Anders Hammer Strømman & Edgar G. Hertwich & Faye Duchin, 2005. "Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry," Rensselaer Working Papers in Economics 0508, Rensselaer Polytechnic Institute, Department of Economics.
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    Citations

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    Cited by:

    1. Faye Duchin & Stephen H. Levine, 2010. "Embodied Resource Flows and Product Flows: Combining the Absorbing Markov Chain with the Input-Output Model," Rensselaer Working Papers in Economics 1002, Rensselaer Polytechnic Institute, Department of Economics.
    2. Hansen, Mark & Smirti, Megan & Zou, Bo, 2008. "A Comparative Evaluation of Greenhouse Gas Emission Reduction Strategies for the Maritime Shipping and Aviation Sectors," University of California Transportation Center, Working Papers qt4j3573wm, University of California Transportation Center.
    3. Faye Duchin, 2005. "A world trade model based on comparative advantage with m regions, n goods, and k factors," Economic Systems Research, Taylor & Francis Journals, vol. 17(2), pages 141-162.
    4. Lining He & Faye Duchin, 2009. "Regional Development In China: Interregional Transportation Infrastructure And Regional Comparative Advantage," Economic Systems Research, Taylor & Francis Journals, vol. 21(1), pages 3-22.
    5. Anders Hammer Strømman & Edgar G. Hertwich & Faye Duchin, 2005. "Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry," Rensselaer Working Papers in Economics 0508, Rensselaer Polytechnic Institute, Department of Economics.
    6. Tarancon, Miguel Angel & Del Río, Pablo, 2012. "Assessing energy-related CO2 emissions with sensitivity analysis and input-output techniques," Energy, Elsevier, vol. 37(1), pages 161-170.
    7. Faye Duchin, 2007. "Energy and the Global Economy," Rensselaer Working Papers in Economics 0704, Rensselaer Polytechnic Institute, Department of Economics.
    8. Wiedmann, Thomas, 2009. "A review of recent multi-region input-output models used for consumption-based emission and resource accounting," Ecological Economics, Elsevier, vol. 69(2), pages 211-222, December.
    9. Lindstad, Haakon & Asbjørnslett, Bjørn E. & Strømman, Anders H., 2011. "Reductions in greenhouse gas emissions and cost by shipping at lower speeds," Energy Policy, Elsevier, vol. 39(6), pages 3456-3464, June.
    10. Chen, Z.M. & Chen, G.Q., 2011. "Embodied carbon dioxide emission at supra-national scale: A coalition analysis for G7, BRIC, and the rest of the world," Energy Policy, Elsevier, vol. 39(5), pages 2899-2909, May.
    11. Alexandre Tisserant & Stefan Pauliuk, 2016. "Matching global cobalt demand under different scenarios for co-production and mining attractiveness," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-19, December.
    12. Faye Duchin & Stephen Levine, 2015. "Rents in the era of resource scarcity: global payment flows under alternative scenarios," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-17, December.
    13. Wiedmann, Thomas & Lenzen, Manfred & Turner, Karen & Barrett, John, 2007. "Examining the global environmental impact of regional consumption activities -- Part 2: Review of input-output models for the assessment of environmental impacts embodied in trade," Ecological Economics, Elsevier, vol. 61(1), pages 15-26, February.

    More about this item

    Keywords

    Input-output model; comparative advantage; world trade model; bilateral trade;

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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