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The Location of Comparative Advantages on the Basis of Fundamentals Only

In: Input–Output Economics: Theory And Applications Featuring Asian Economies

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  • Thijs ten Raa
  • Pierre Mohnen
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.

Suggested Citation

  • Thijs ten Raa & Pierre Mohnen, 2009. "The Location of Comparative Advantages on the Basis of Fundamentals Only," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 23, pages 425-446, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812833679_0023
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    1. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    2. Thijs ten Raa & Pierre Mohnen, 2009. "The Location of Comparative Advantages on the Basis of Fundamentals Only," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 23, pages 425-446, World Scientific Publishing Co. Pte. Ltd..
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    7. Pieter Kop Jansen & Thijs ten Raa, 2009. "The Choice of Model in the Construction of Input–Output Coefficients Matrices," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 4, pages 47-66, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Marian Leimbach & Baumstark, Lavinia, 2011. "Intertemporal trade and the Integrated Assessment of climate change mitigation policies," EcoMod2011 3036, EcoMod.
    2. Eric O’N. Fisher & Kathryn G. Marshall, 2016. "Leontief was not right after all," Journal of Productivity Analysis, Springer, vol. 46(1), pages 15-24, August.
    3. repec:dgr:rugsom:04c11 is not listed on IDEAS
    4. Thijs ten Raa & Pierre Mohnen, 2009. "The Location of Comparative Advantages on the Basis of Fundamentals Only," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 23, pages 425-446, World Scientific Publishing Co. Pte. Ltd..
    5. Thijs ten Raa & Haoran Pan, 2009. "Competitive Pressures on China: Income Inequality and Migration," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 24, pages 449-485, World Scientific Publishing Co. Pte. Ltd..
    6. Prieto, Angel M. & Zofio, Jose L., 2007. "Network DEA efficiency in input-output models: With an application to OECD countries," European Journal of Operational Research, Elsevier, vol. 178(1), pages 292-304, April.
    7. Kagawa, Shigemi, 2008. "How does Japanese compliance with the Kyoto Protocol affect environmental productivity in China and Japan?," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 173-188, June.
    8. Victoria Shestalova, 2001. "General Equilibrium Analysis of International TFP Growth Rates," Economic Systems Research, Taylor & Francis Journals, vol. 13(4), pages 391-404.
    9. Shu-hen Chiang, 2009. "Location quotient and trade," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(2), pages 399-414, June.
    10. Ten Raa, T. & Shestalova, V., 2006. "Alternative Measures of Total Factor Productivity Growth," Discussion Paper 2006-54, Tilburg University, Center for Economic Research.
    11. Chandrima Sikdar, 2010. "India–Sri Lanka Bilateral Trade," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 11(2), pages 155-180, September.
    12. Alex Hoen & Jan Oosterhaven, 2006. "On the measurement of comparative advantage," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(3), pages 677-691, August.
    13. Sahoo, A., 2008. "Essays on the Indian economy : Competitive pressure, productivity and performance," Other publications TiSEM 374e9035-815c-43fe-a68e-e, Tilburg University, School of Economics and Management.
    14. Thijs ten Raa & Victoria Shestalova, 2021. "The Solow Residual, Domar Aggregation, and Inefficiency: A Synthesis of TFP Measures," World Scientific Book Chapters, in: Efficiency and Input-Output Analyses Theory and Applications, chapter 2, pages 23-38, World Scientific Publishing Co. Pte. Ltd..

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    More about this item

    Keywords

    Input–Output Analysis; National Accounts; Productivity; Performance; Canadian Economy; Chinese Economy; Indian Economy; Asian Economics;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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