Publication Type

Journal Article

Version

Preprint

Publication Date

11-2010

Abstract

This paper develops an approach for quantifying the importance of different sources of comparative advantage, by extending the Eaton and Kortum (2002) model to predict industry trade flows. In this framework, comparative advantage is determined by the interaction of country and industry characteristics, with countries specializing in industries whose production needs they can best meet with their factor endowments and institutional strengths. I estimate the model parameters using: (i) OLS; and (ii) a simulated method of moments procedure that accounts for the prevalence of zeros in the bilateral trade data. I apply the model to explore various quantitative questions, such as how much distance, Ricardian productivity, factor endowments, and institutions each matter for country welfare in the global trade equilibrium.

Keywords

Comparative advantage; Gravity; Ricardian model; Factor endowments; Institutional determinants of trade; Simulated method of moments

Discipline

International Economics

Research Areas

International Economics

Publication

Journal of International Economics

Volume

82

Issue

2

First Page

152

Last Page

167

ISSN

0022-1996

Identifier

10.1016/j.jinteco.2010.07.004

Publisher

Elsevier

Copyright Owner and License

Author

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jinteco.2010.07.004

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