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Simulating the Constant Cost Trade Model

Author

Listed:
  • Nazif Durmaz
  • Henry Thompson

Abstract

This paper simulates the constant cost trade model with labor inputs for three and five regions and products aggregated from the World Input-Output Database. The regions start with America, Asia, and Europe trading Resources, Manufactures, and Services. Each region maximizes Cobb-Douglas utility based on global consumption shares subject to balanced trade and global material balance. Simulated autarky and trade with the rest of the world lead to the full model with multiple potential equilibria. Diversified exports and import competition characterize the trade patterns with the gains from trade relative to autarky up to 20% for the five regions.

Suggested Citation

  • Nazif Durmaz & Henry Thompson, 2024. "Simulating the Constant Cost Trade Model," Auburn Economics Working Paper Series auwp2024-03, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2024-03
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    File URL: https://cla.auburn.edu/econwp/Archives/2024/2024-03.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    comparative advantage; relative prices; simulation; constant cost trade;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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    This paper has been announced in the following NEP Reports:

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