Working Paper: NBER ID: w16806
Authors: Andrei A. Levchenko; Jing Zhang
Abstract: We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specific average rate, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. In this counterfactual scenario, welfare is also 1.6% higher for the median country compared to the baseline. The welfare impact varies greatly across countries, ranging from -1.1% to +4.3% among OECD countries, and from -4.6% to +41.9% among non-OECD countries.
Keywords: comparative advantage; productivity; trade volumes; welfare implications
JEL Codes: F11; F43; O33; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| comparative advantage (F11) | trade volumes (F10) |
| comparative advantage (F11) | welfare (I38) |
| initial comparative disadvantage (F11) | productivity growth (O49) |
| weakening of comparative advantage (F11) | changes in trade volumes and patterns (F10) |
| comparative advantage (F11) | welfare outcomes (I38) |