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A World Trade Model with Bilateral Trade Based on Comparative Advantage

  • Anders Hammer Str�mman

    (Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program H�yskoleringen 5, 7491 Trondheim, Norway)

  • Faye Duchin

    ()

    (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA)

This paper describes an extension of Duchin's World Trade Model to include the explicit representation of transportation costs, permitting the endogenous determination of bilateral trade °ree;ows and region-specific prices. The original model is a linear program that, based on comparative advantage and the minimization of factor use, determines regional production and trade °ree;ows as well as world prices and scarcity rents for m regions, n goods, s transportation sectors, and k factors. The new World Trade Model with Bilateral Trade achieves its objectives by introducing transportation services and geographically dependent transportation requirements for each traded good and each pair of potential trade partners. The formulation of this model and its major properties are presented, and results from a preliminary analysis with 11 regions, 8 goods, 4 transportation sectors, and 6 factors of production are reported and compared with corresponding results from the World Trade Model.

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Paper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0509.

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Date of creation: Jun 2005
Date of revision: Jun 2006
Handle: RePEc:rpi:rpiwpe:0509
Contact details of provider: Web page: http://www.economics.rpi.edu/
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  1. Leontief, Wassily, 1977. "The future of the world economy+," Socio-Economic Planning Sciences, Elsevier, vol. 11(3), pages 171-182.
  2. Faye Duchin, 2003. "A World Trade Model Based on Comparative Advantage with m Regions, n Goods, and k Factors," Rensselaer Working Papers in Economics 0309, Rensselaer Polytechnic Institute, Department of Economics, revised Mar 2004.
  3. Anders Hammer Str�mman & Edgar G. Hertwich & Faye Duchin, 2005. "Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry," Rensselaer Working Papers in Economics 0508, Rensselaer Polytechnic Institute, Department of Economics.
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