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Measuring Comparative advantage : A Ricardian approach Johannes Moenius*. University of Redlands Preliminary, please do not cite comments highly appreciated 06/12/2006. ABSTRACT. In this paper, we derive and compare several production- and export-based measures of Comparative advantage within a Ricardian framework. We first sort commodities into industries in order to obtain industry-specific indicators of Comparative advantage . We then compare these measures against a simple theoretical benchmark. First, we show that theoretically correct production- and export-based indicators are equivalent when there are no trade costs such as transport fees, insurance and tariffs. However, in the presence of trade costs, most measures perform poorly, and the more important trade costs are, generally the poorer the performance. Second, Balassa's (1965, 1979) export-based index of Revealed Comparative advantage is generally not a valid measure of Comparative advantage across industries or over time.
Measuring Comparative Advantage: A Ricardian Approach Johannes Moenius* University of Redlands Preliminary, please do not cite comments highly appreciated
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