Comparative Advantage, the Rank-Size Rule, and Zipf's Law
Tinbergen Institute Discussion Paper No. 06-1001/1
39 Pages Posted: 9 Nov 2006
Date Written: November 2006
Using a comprehensive international trade data set we investigate empirical regularities (known as Zipf's Law or the rank-size rule) for the distribution of the interaction between countries as measured by revealed comparative advantage. Using the recently developed estimator by Gabaix and Ibragimov (2006) we find strong evidence in favor of the rank-size rule along the time, country, and sector dimension for three different levels of data aggregation. The estimated power exponents that characterize the distribution of revealed comparative advantage are stable over time but differ between countries and sectors. These differences are related empirically to country and sector characteristics, including population size, GDP, and factor intensities.
Keywords: Revealed comparative advantage, Balassa index, rank-size rule, Zipf's Law, power law, Pareto distribution
JEL Classification: C13, C33, F1, L1, O5, R12
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