The Location of Comparative Advantages on the Basis of Fundamentals Only

Thijs ten Raa and Pierre Mohnen

Economic Systems Research, 2001, vol. 13, issue 1, 93-108

Abstract: We propose a new way to locate the comparative advantages of two economies linked by international trade. We construct a competitive benchmark based only on the fundamentals of the two economies: endowments, preferences and technologies. The direction of trade is endogenously determined by a linear program with an input-output core. The factor contents of that trade are compared with factor endowments to test the Heckscher-Ohlin model in the presence of different technologies and preferences. We can also evaluate the gains of free bilateral trade. The model is applied to a customs union between Europe and Canada. The Heckscher-Ohlin factor abundance specialization hypothesis is supported by the data.

Keywords: Comparative Advantage; Gains Free Trade (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (15)

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Related works:
Chapter: The Location of Comparative Advantages on the Basis of Fundamentals Only (2009)
Working Paper: The Location of Comparative Advantages on the Basis of Fundamentals Only (1997)
Working Paper: The location of comparative advantages on the basis of fundamentals only (1996)
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DOI: 10.1080/09535310120026265

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