publication . Other literature type . Report . Preprint . Article . 2013

Ricardian productivity differences and the gains from trade

Andrei A. Levchenko; Jing Zhang;
  • Published: 01 Nov 2013
  • Publisher: Elsevier BV
Abstract
This paper evaluates the role of sectoral heterogeneity in determining the gains from trade. We first show analytically that in the presence of sectoral Ricardian comparative advantage, a one-sector sufficient statistic formula that uses total trade volumes as a share of total absorption systematically understates the true gains from trade. Greater relative sectoral productivity differences lead to larger disparities between the gains implied by the one-sector formula and the true gains. Using data on overall and sectoral trade shares in a sample of 79 countries and 19 sectors we show that the multi-sector formula implies on average 30% higher gains from trade t...
Subjects
free text keywords: jel:F4, Economics and Econometrics, Finance, A share, Comparative advantage, Economics, Total trade, Gains from trade, Sufficient statistic, Microeconomics
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