Working Paper: NBER ID: w1198
Authors: Robert E. Baldwin; R. Spence Hilton
Abstract: This paper estimates relative differences in factor prices (and thus industry comparative cost differences) between the United States and each of eight country groups by relating differences in factor-use requirement and actual bilateral export/import ratios across industries. Predictions concerning changes in industry export/import ratios are also made (and tested against actual subsequent changes) by comparing these trade ratios with those expected on the basis of the estimated average differences infactor costs and assuming that adjustment lags are the major reason for the differences between these ratios.
Keywords: comparative costs; trade ratios; factor prices
JEL Codes: F10; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Relative factor price differences (F16) | Trade ratios (F10) |
| Cost advantages (F12) | Exports from A to B exceed imports from B to A (F10) |
| Predicted trade ratios based on factor prices (F16) | Actual changes in trade ratios (F19) |
| Industries with lower actual export-import ratio (F14) | Increase in export-import ratio over time (F10) |
| Predicted changes in trade ratios (F17) | Actual outcomes (P17) |
| Adjustment lags (F32) | Relationship between predicted and actual trade ratios (F17) |