Endogenous Comparative Advantage, Government, and the Pattern of Trade
This paper explores the relationship between government policy and comparative advantage in a neoclassical model of international trade. A specification of the Ricardo-Viner model with public goods and public inputs is presented that is used to study the role that government policy can play in the determination and promotion of comparative advantage and in the maximization of the gains that may be obtained from international trade. The model is also used to study the influence that international trade can exert on the scale and scope of government activity. The paper endeavors to reconcile a positive theory of trade and government with the apparent shift in measured productivity that often follows an opening to trade. The paper concludes by interpreting the model in the context of recent policy discussions of such issues as structural impediments, competitiveness, and the role of trade policy.
|Date of creation:||Aug 1991|
|Date of revision:|
|Publication status:||published as Clarida, Richard H. and Ronald Findlay. "Government, Trade, And Comparative Advantage," American Economic Review, 1992, v82(2), 122-127.|
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- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
- Ishizawa, Suezo, 1988. "Increasing Returns, Public Inputs, and International Trade," American Economic Review, American Economic Association, vol. 78(4), pages 794-95, September.
- Connolly, Michael, 1972. "Trade in Public Goods: A Diagrammatic Analysis," The Quarterly Journal of Economics, MIT Press, vol. 86(1), pages 61-78, February.
- R. Manning & J. McMillan, 1979. "Public Intermediate Goods, Production Possibilities, and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 12(2), pages 243-57, May.
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