Accounting for Trade Patterns

Stephen Redding and David Weinstein

Working Papers from Princeton University. Economics Department.

Abstract: We develop a quantitative framework for exactly decomposing trade patterns into economically meaningful components. We derive price indexes that determine comparative advantage across countries and sectors and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average demand or quality, and the dispersion of demand or quality-adjusted prices, and are only weakly related to standard empirical measures of average prices, thereby providing insight for elasticity puzzles. Of the cross-section (time-series) variation in comparative advantage, 50 (90) percent is accounted for by variety and average demand or quality, with average prices contributing less than 10 percent.

Keywords: comparative advantage; trade; prices; quality; variety (search for similar items in EconPapers)
JEL-codes: F11 F12 F14 (search for similar items in EconPapers)
Date: 2018-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://www.princeton.edu/~reddings/papers/AMMPT-07Mar2018-paper.pdf

Related works:
Journal Article: Accounting for trade patterns (2024)
Working Paper: Accounting for Trade Patterns (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2018-10

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