Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence
When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: `Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those that are currently being grown. This direct information about relative productivity differences across economic activities allows us to compute, for the first time, the output predicted by Ricardo's theory of comparative advantage. Despite all of the real-world considerations from which this theory abstracts, we find that Ricardo's theory of comparative advantage has significant explanatory power in the data, at least within the scope of our analysis.
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- Arnaud Costinot, 2009.
"An Elementary Theory of Comparative Advantage,"
Econometric Society, vol. 77(4), pages 1165-1192, 07.
- Nunn, Nathan & Qian, Nancy, 2009.
"The Potato's Contribution to Population and Urbanization: Evidence from an Historical Experiment,"
CEPR Discussion Papers
7364, C.E.P.R. Discussion Papers.
- Nathan Nunn & Nancy Qian, 2011. "The Potato's Contribution to Population and Urbanization: Evidence From A Historical Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 593-650.
- Nathan Nunn & Nancy Qian, 2009. "The Potato's Contribution to Population and Urbanization: Evidence from an Historical Experiment," NBER Working Papers 15157, National Bureau of Economic Research, Inc.
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