The Location of Comparative Advantages on the Basis of Fundamentals Only

P. Mohnen; T. ten Raa

doi:10.1080/09535310120026265

The Location of Comparative Advantages on the Basis of Fundamentals Only

P. Mohnen, T. ten Raa

Mt Economic Research Inst on Innov/Techn

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We propose a new way to locate the comparative advantages of two economies linked by international trade. We construct a competitive benchmark based only on the fundamentals of the two economies: endowments, preferences and technologies. The direction of trade is endogenously determined by a linear program with an input-output core. The factor contents of that trade are compared with factor endowments to test the heckscher-ohlin model in the presence of different technologies and preferences. We can also evaluate the gains of free bilateral trade. The model is applied to a customs union between europe and canada. The heckscher-ohlin factor abundance specialization hypothesis is supported by the data.

Original language	English
Pages (from-to)	93-108
Journal	Economic Systems Research
Volume	13
Issue number	1
DOIs	https://doi.org/10.1080/09535310120026265
Publication status	Published - 1 Jan 2001

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10.1080/09535310120026265

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