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What Goods Do Countries Trade? New Ricardian Predictions

  • Costinot, Arnaud
  • Komunjer, Ivana

Though one of the pillars of the theory of international trade, the extreme predictions of the Ricardian model have made it unsuitable for empirical purposes. A seminal contribution of Eaton and Kortum (2002) is to demonstrate the stochastic productivity differences at the firm-level are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important question: What goods do countries trade? Our main contribution is to generalize their approach and provide an empirically meaningful answer to this question.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt86n316hw.

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Date of creation: 01 Oct 2006
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Handle: RePEc:cdl:ucsdec:qt86n316hw
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