We are grateful to Óscar Afonso, Don Davis, Tim Kehoe, Morten Ravn, Matt Slaughter, Tony Venables, Jaume Ventura, David Weinstein, Kei-Mu Yi and two anonymous referees for valuable discussions; seminar participants at Århus, Bocconi, Cambridge, University College Dublin, Essex, Geneva, LSE, Mainz, the New York Fed, Nottingham, SED 2003, Southampton, Toulouse, Vigo, and SPiE 2004 for helpful comments; and Kwok-Tong Soo for superb research assistance. We gratefully acknowledge research funding from CICYT (SEC 2002-0026), MURST, and Università Bocconi. All errors remain ours.
Can Comparative Advantage Explain the Growth of us Trade?*
Article first published online: 1 JUN 2007
The Economic Journal
Volume 117, Issue 520, pages 583–602, April 2007
How to Cite
Cuñat, A. and Maffezzoli, M. (2007), Can Comparative Advantage Explain the Growth of us Trade?. The Economic Journal, 117: 583–602. doi: 10.1111/j.1468-0297.2007.02042.x
- Issue published online: 1 JUN 2007
- Article first published online: 1 JUN 2007
- Submitted: 3 November 2004 Accepted: 1 March 2006
We present a dynamic comparative advantage model in which moderate reductions in import tariffs can generate sizable increases in trade volumes over time. A fall in tariffs has two effects. First, for given factor endowments, it raises the degree of specialisation, leading to a larger volume of trade in the short run. Second, it raises the factor price of each country's abundant factor, leading to diverging paths of relative factor endowments and a rising degree of specialisation. A simulation exercise shows that a fall in tariffs produces a disproportional increase in the trade share of output as in the data.