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Complexity as a source of comparative advantage

  • Asier Minondo

    ()

    (Deusto Business School - University of Deusto)

  • Francisco Requena

    ()

    (University of Valencia)

This paper analyzes whether complexity, measured by the number of skilled tasks that are performed simultaneously in production, explains countries' commodity trade structure. We modify Romalis (2004) model to incorporate differences in complexity across commodities together with differences in average skills across countries and monopolistic competition. Our model predicts that the share of developed countries in world trade increases with products' complexity. The empirical tests confirm this prediction. Moreover, complexity seems to provide a better explanation of countries' commodity trade structure than the one offered only by skill intensity.

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File Function: First version, 2012
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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1214.

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Length: 27 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:eec:wpaper:1214
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  1. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
  2. Justin R. Pierce & Peter K. Schott, 2009. "A Concordance Between Ten-Digit U.S. Harmonized System Codes and SIC/NAICS Product Classes and Industries," NBER Working Papers 15548, National Bureau of Economic Research, Inc.
  3. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  4. Arnaud Costinot & Lindsay Oldenski & James Rauch, 2011. "Adaptation and the Boundary of Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 298-308, February.
  5. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
  6. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  7. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  8. Alan S. Blinder, 2007. "How Many U.S. Jobs Might Be Offshorable?," Working Papers 60, Princeton University, Department of Economics, Center for Economic Policy Studies..
  9. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  10. Niven Winchester & David Greenaway & Geoffrey V. Reed, 2006. "Skill Classification and the Effects of Trade on Wage Inequality," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 287-306, July.
  11. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  12. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage: A Quantitative Approach," Working Papers 13-2008, Singapore Management University, School of Economics.
  13. Morrow, Peter M., 2010. "Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence," Journal of International Economics, Elsevier, vol. 82(2), pages 137-151, November.
  14. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
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