Competing Gains From Trade

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Title: Competing Gains From Trade
Authors: Struck, Clemens C.Velic, Adnan
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Date: Mar-2019
Online since: 2019-05-23T09:45:23Z
Abstract: Differences in growth rates across countries imply a strong relation between factor proportions based trade and key aggregate economic outcomes. We construct two macro-trade datasets and illustrate that this relation is rather weak in the data. We propose a simple explanation: in the presence of intra- industry trade, pronounced trade specialization patterns culminate in a loss of varieties. In a dynamic two-country model, we illustrate that the introduction of intra-industry trade overwhelmingly subdues the inter-industry trade dynamics and realigns the behavior of standard models with the empirical evidence along various dimensions. We also provide empirical support for our mechanism: labor and capital intensive goods are traded between developed and developing countries in both directions and in similar proportions in overall trade.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP19/09
Copyright (published version): 2019 the Authors
Keywords: Heckscher OhlinArmington tradeFactor proportion based tradeComparative advantageDynamic two-country general equilibrium modelsFeldstein-Horioka
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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