The Classical Ricardian Theory of Comparative Advantage Revisited

Abstract

According to the classical Ricardian theory of comparative advantage, relative labor productivities determine trade patterns. The Ricardian model plays an important pedagogical role in international economics, but has received scant empirical attention since the 1960s. This paper assesses the contemporary relevance of the Ricardian model for U.S. trade. Cross-section seemingly unrelated regressions of sectoral trade flows on relative labor productivity and unit labor costs are run for a number of countries vis-a-vis the United States. The coefficients are almost always correctly signed and statistically significant, although much of the sectoral variation of trade remains unexplained.

JEL Classification: F11, F14