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The Empirics of General Equilibrium Trade Theory: What Have We Learned?

  • Daniel M. Bernhofen

This paper provides a selective survey of over half a century of research linking the neoclassical trade model to the data. Tensions between restrictive formulations of the model and real world complexities have launched a research agenda aimed at refining and reformulating theory to provide more convincing links between theoretical specification and empirical research design. Three lessons stand out. First, competitive and new trade theory models are complementary rather than competing ways to look at many existing empirical regularities. Second, the Ricardian formulation has proved to be a useful framework for structural estimation exercises regarding the pattern of international specialization. Third, empirical confirmations of the core predictions of the model provide scientific support for employing the competitive trade model in structural estimation.

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 10/24.

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Handle: RePEc:not:notgep:10/24
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  2. Daniel M. Bernhofen & John C. Brown, 2009. "Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan," Global COE Hi-Stat Discussion Paper Series gd09-058, Institute of Economic Research, Hitotsubashi University.
  3. Arnaud Costinot & Dave Donaldson & Ivana Komunjer, 2012. "What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 581-608.
  4. Andrei A Levchenko, 2004. "Institutional Quality and International Trade," IMF Working Papers 04/231, International Monetary Fund.
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  6. Richard A. Brecher & Ehsan U. Choudhri, 1993. "Some Empirical Support for the Heckscher-Ohlin Model of Production," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 272-85, May.
  7. Yong_Seok Choi & Pravin Krishna, 2000. "The Factor Content of Bilateral Trade:an Empirical Test," Working Papers 2000-11, Brown University, Department of Economics.
  8. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
  9. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
  10. Donald R. Davis & David E. Weinstein, 1998. "An Account of Global Factor Trade," Harvard Institute of Economic Research Working Papers 1849, Harvard - Institute of Economic Research.
  11. Bernhofen, Daniel M., 2009. "Multiple cones, factor price differences and the factor content of trade," Journal of International Economics, Elsevier, vol. 79(2), pages 266-271, November.
  12. Daniel M. Bernhofen, 2005. "The Empirics of Comparative Advantage: Overcoming the Tyranny of Nonrefutability," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 1017-1023, November.
  13. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," NBER Working Papers 14645, National Bureau of Economic Research, Inc.
  14. Peter M. Morrow, 2008. "East is East and West is West: A Ricardian-Heckscher-Ohlin Model of Comparative Advantage," Working Papers 575, Research Seminar in International Economics, University of Michigan.
  15. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June.
  16. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  17. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
  18. Neary, J Peter & Schweinberger, Albert G, 1984. "Factor Content Functions and the Theory of International Trade," CEPR Discussion Papers 3, C.E.P.R. Discussion Papers.
  19. Brecher, Richard A & Choudhri, Ehsan U, 1982. "The Leontief Paradox, Continued," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 820-23, August.
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  22. Daniel M. Bernhofen & John C. Brown, 2005. "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan," American Economic Review, American Economic Association, vol. 95(1), pages 208-225, March.
  23. Reimer, Jeffrey J., 2006. "Global production sharing and trade in the services of factors," Journal of International Economics, Elsevier, vol. 68(2), pages 384-408, March.
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