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- Title
What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas.
- Authors
Costinot, Arnaud; Donaldson, Dave; Komunjer, Ivana
- Abstract
The Ricardian model predicts that countries should produce and export relatively more in industries in which they are relatively more productive. Though one of the most celebrated insights in the theory of international trade, this prediction has received little attention in the empirical literature since the mid-1960s. The main reason behind this lack of popularity is the absence of clear theoretical foundations to guide the empirical analysis. Building on the seminal work of Eaton and Kortum (“Technology, Geography, and Trade”, Econometrica, 70, 1741–1779 2002), we offer such foundations and use them to quantify the importance of Ricardian comparative advantage. In the process, we also provide a theoretically consistent alternative to Balassa's (1965, “An Empirical Demonstration of Classical Comparative Cost Theory”, Review of Economics and Statistics, 45, 231–238) well-known index of “revealed comparative advantage”.
- Subjects
RICARDIAN Model of International Trade; COMPARATIVE advantage (International trade); MATHEMATICAL models of economic forecasting; PRODUCTIVITY accounting; COMMODITY exchanges; EMPIRICAL research
- Publication
Review of Economic Studies, 2012, Vol 79, Issue 2, p581
- ISSN
0034-6527
- Publication type
Article
- DOI
10.1093/restud/rdr033