Competing Gains From Trade

Clemens Struck () and Adnan Velic
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Clemens Struck: Trinity College Dublin

Economic Papers from Trinity College Dublin, Economics Department

Abstract: Differences in growth rates across countries imply a strong relation between factor-proportions-based trade and key aggregate economic outcomes. We construct two macro-trade datasets and illustrate that this relation is rather weak empirically. Employing a dynamic two-country model, we propose a simple explanation for this finding. By limiting the substitutability between domestic and foreign tradable varieties, the presence of intra-industry trade implies that pronounced trade specialization patterns culminate in a loss of varieties. Accordingly, intra-industry trade acts to suppress inter-industry trade dynamics, thus realigning the behavior of standard models with the empirical evidence.

Keywords: factor-proportions-based trade; inter- and intra-industry trade dynamics; comparative advantage; dynamic two-country general equilibrium models; Feldstein-Horioka (search for similar items in EconPapers)
JEL-codes: F11 F12 F32 F41 F43 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016-08, Revised 2018-04
New Economics Papers: this item is included in nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.tcd.ie/Economics/TEP/2016/TEP1116.pdf

Related works:
Working Paper: Competing Gains From Trade (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1116

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