What Goods Do Countries Trade? New Ricardian Predictions

Arnaud Costinot and Ivana Komunjer

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: Though one of the pillars of the theory of international trade, the extreme predictions of the Ricardian model have made it unsuitable for empirical purposes. A seminal contribution of Eaton and Kortum (2002) is to demonstrate the stochastic productivity differences at the firm-level are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important question: What goods do countries trade? Our main contribution is to generalize their approach and provide an empirically meaningful answer to this question.

Keywords: Random Productivity Shocks; Ricardian Comparative Advantage; Predictions of Trade Patterns (search for similar items in EconPapers)
Date: 2006-10-01
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Citations: View citations in EconPapers (5)

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Working Paper: What Goods Do Countries Trade? New Ricardian Predictions (2007)
Working Paper: What Good Do Countries Trade? New Ricardian Predictions (2006)
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