Relative Prices and Empirical Trade Patterns

Nazif Durmaz and Henry Thompson

No auwp2020-06, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: This paper examines empirical links between relative prices and bilateral trade based on constant cost trade theory. The global models are built from the World Input-Output Database WIOD aggregated to three, four, and five regions and goods. The simple model assumes relative labor shares are relative prices and average relative price is the terms of trade. Trade patterns are complex among partially specialized regions. Model predictions are compared to observed net exports in seven different aggregations. Regression analysis also examines the effects of relative prices on the total bilateral net exports across models.

Keywords: relative prices; comparative advantage; trade patterns; partial specialization (search for similar items in EconPapers)
JEL-codes: F10 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-int and nep-ore
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