The Evolution of Comparative Advantage: Measurement and Implications

University of Zurich, UBS International Center of Economics in Society, Working Paper No. 11

67 Pages Posted: 24 Apr 2015

See all articles by Andrei A. Levchenko

Andrei A. Levchenko

University of Michigan - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Jing Zhang

Federal Reserve Bank of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: April 2015

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-specic 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: Technological change, sectoral TFP, Ricardian models of trade, welfare

JEL Classification: F11, F43, O33, O47

Suggested Citation

Levchenko, Andrei A. and Zhang, Jing, The Evolution of Comparative Advantage: Measurement and Implications (April 2015). University of Zurich, UBS International Center of Economics in Society, Working Paper No. 11, Available at SSRN: https://ssrn.com/abstract=2597593 or http://dx.doi.org/10.2139/ssrn.2597593

Andrei A. Levchenko (Contact Author)

University of Michigan - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

HOME PAGE: http://alevchenko.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jing Zhang

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
22
Abstract Views
389
PlumX Metrics