Comparative Advantage and Optimal Trade Policy

Arnaud Costinot, Dave Donaldson, Jonathan Vogel and Iván Werning

No 19689, NBER Working Papers from National Bureau of Economic Research, Inc

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 paper 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 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-int
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Arnaud Costinot & Dave Donaldson & Jonathan Vogel & Iván Werning, 2015. "Comparative Advantage and Optimal Trade Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 130(2), pages 659-702.

Downloads: (external link)
http://www.nber.org/papers/w19689.pdf (application/pdf)

Related works:
Journal Article: Comparative Advantage and Optimal Trade Policy (2015)
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:nbr:nberwo:19689

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19689

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().