Airplanes and Comparative Advantage

43 Pages Posted: 20 Jul 2006 Last revised: 28 Jul 2010

See all articles by James Harrigan

James Harrigan

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2005

Abstract

Airplanes are a fast but expensive means of shipping goods, a fact which has implications for comparative advantage. The paper develops a Ricardian model with a continuum of goods which vary by weight and hence transport cost. Comparative advantage depends on relative air and surface transport costs across countries and goods, as well as stochastic productivity. A key testable implication is that the U.S. should import heavier goods from nearby countries, and lighter goods from faraway counties. This implications is tested using detailed data on U.S. imports from 1990 to 2003. Looking across goods the U.S. imports, nearby exporters have lower market share in goods that the rest of the world ships by air. Looking across exporters for individual goods, distance from the US is associated with much higher import unit values. These effects are large, which establishes that the model identifies an important influence on specialization and trade.

Suggested Citation

Harrigan, James, Airplanes and Comparative Advantage (October 2005). NBER Working Paper No. w11688. Available at SSRN: https://ssrn.com/abstract=823984

James Harrigan (Contact Author)

University of Virginia - Department of Economics ( email )

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Charlottesville, VA 22904-4182
United States

National Bureau of Economic Research (NBER)

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