Comparative Advantage and Optimal Trade Policy

Arnaud Costinot, Dave Donaldson, Jonathan Vogel and Iván Werning

The Quarterly Journal of Economics, 2015, vol. 130, issue 2, 659-702

Abstract: The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this article we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules. JEL Codes: F10, F11, F13.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (51)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjv007 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Comparative Advantage and Optimal Trade Policy (2013)
Working Paper: Comparative Advantage and Optimal Trade Policy (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:130:y:2015:i:2:p:659-702

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().