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What Good 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 that random productivity shocks are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important questions: What goods to countries trade? Our main contribution is to generalize their approach and provide and 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 qt9t9818ng.

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Date of creation: 01 Oct 2006
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Handle: RePEc:cdl:ucsdec:qt9t9818ng
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  1. Petri, Peter A., 1980. "A Ricardian model of market sharing," Journal of International Economics, Elsevier, vol. 10(2), pages 201-211, May.
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  18. Alan V. Deardorff, 2005. "How Robust is Comparative Advantage?," Working Papers 537, Research Seminar in International Economics, University of Michigan.
  19. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  20. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
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