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Wiley InterScience | |||
  The Economic JournalVolume 117 Issue 520, Pages 583 - 602 Published Online: 1 Jun 2007 Journal compilation © 2009 by the Royal Economic Society (Registered Charity No. 231508) Published on behalf of the Royal Economic Society
Abstract | References | Full Text: HTML, PDF (Size: 395K) | Related Articles | Citation Tracking  Can Comparative Advantage Explain the Growth of us Trade?* * We are grateful to Óscar Afonso, Don Davis, Tim Kehoe, Morten Ravn, Matt Slaughter, Tony Venables, Jaume Ventura, David Weinstein, Kei-Mu Yi and two anonymous referees for valuable discussions; seminar participants at Århus, Bocconi, Cambridge, University College Dublin, Essex, Geneva, LSE, Mainz, the New York Fed, Nottingham, SED 2003, Southampton, Toulouse, Vigo, and SPiE 2004 for helpful comments; and Kwok-Tong Soo for superb research assistance. We gratefully acknowledge research funding from CICYT (SEC 2002-0026), MURST, and Università Bocconi. All errors remain ours. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007 ABSTRACTWe present a dynamic comparative advantage model in which moderate reductions in import tariffs can generate sizable increases in trade volumes over time. A fall in tariffs has two effects. First, for given factor endowments, it raises the degree of specialisation, leading to a larger volume of trade in the short run. Second, it raises the factor price of each country's abundant factor, leading to diverging paths of relative factor endowments and a rising degree of specialisation. A simulation exercise shows that a fall in tariffs produces a disproportional increase in the trade share of output as in the data. Submitted: 3 November 2004 Accepted: 1 March 2006 | 
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