Working Paper: CEPR ID: DP15160
Authors: Peter Egger; Sergey Nigai
Abstract: This paper reassesses the question of the importance of comparative advantage in a model of international trade with heterogeneous firms where productivity is distributed nonparametrically. This assessment rests on a method of isolating empirical productivity distributions for 15 countries and 17 sectors using a combination of firm-level and macroeconomic data together with the structure of the model. In this setting, the effects of technology on trade are substantial and cannot be captured by a small set of technology parameters. On average, comparative advantage accounts for 23% of the observed variation in trade or 70\% in the absence of selection effects.
Keywords: empirical productivity distributions; comparative advantage; quantitative trade; selection effects
JEL Codes: F1; F10; F12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| comparative advantage (F11) | trade shares (G10) |
| technology (O39) | trade shares (G10) |
| productivity differences (O49) | trade patterns (F10) |
| technology (O39) | relative autarky price differences (F16) |