IDEAS home Printed from https://ideas.repec.org/a/bla/ijethy/v19y2023i1p166-174.html
   My bibliography  Save this article

Technology advantage, terms of trade, and pattern of trade

Author

Listed:
  • Cheng‐Te Lee
  • Shang‐Fen Wu

Abstract

We develop a two‐country, two‐sector model of trade, and assume that the differences between two countries are not only the diversities of human capital distributions but also relative production technologies. We find that, in addition to the diversity effect, both the terms of trade effect and the relative technology effect can also matter for the pattern of trade. We prove that, unlike previous results, if combination of the terms of trade effect and the relative technology effect dominates the diversity effect, then a country with more diverse human capital will export goods produced by supermodular technology.

Suggested Citation

  • Cheng‐Te Lee & Shang‐Fen Wu, 2023. "Technology advantage, terms of trade, and pattern of trade," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 166-174, March.
    • Handle: RePEc:bla:ijethy:v:19:y:2023:i:1:p:166-174
    DOI: 10.1111/ijet.12342
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ijet.12342
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ijet.12342?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    2. Costinot, Arnaud & Komunjer, Ivana, 2006. "What Good Do Countries Trade? New Ricardian Predictions," University of California at San Diego, Economics Working Paper Series qt9t9818ng, Department of Economics, UC San Diego.
    3. Alejandro Cuñat & Marc J. Melitz, 2012. "Volatility, Labor Market Flexibility, And The Pattern Of Comparative Advantage," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 225-254, April.
    4. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    5. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-494, September.
    6. Cheng Te Lee, 2012. "The Impact of Talent Distribution on Trade," Economics Bulletin, AccessEcon, vol. 32(3), pages 2198-2206.
    7. Golub, Stephen S & Hsieh, Chang-Tai, 2000. "Classical Ricardian Theory of Comparative Advantage Revisited," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 221-234, May.
    8. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
    9. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 791-819.
    10. Morrow, Peter M., 2010. "Ricardian-Heckscher-Ohlin comparative advantage: Theory and evidence," Journal of International Economics, Elsevier, vol. 82(2), pages 137-151, November.
    11. Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-2348, August.
    12. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2005. "Contracts and the Division of Labor," NBER Working Papers 11356, National Bureau of Economic Research, Inc.
    13. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
    14. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
    15. Stephen S. Golub & Chang‐Tai Hsieh, 2000. "Classical Ricardian Theory of Comparative Advantage Revisited," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 221-234, May.
    16. Cheng-Te Lee & Deng-Shing Huang, 2015. "Trade and market integration with heterogeneous labor," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(4), pages 428-448, December.
    17. Spiros Bougheas & Raymond Riezman, 2013. "Trade and the distribution of human capital," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 20, pages 395-407, World Scientific Publishing Co. Pte. Ltd..
    18. Kiminori Matsuyama, 2005. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 714-723, 04/05.
    19. Kuo-Hsing Kuo & Cheng-Te Lee, 2018. "Technology Advantage, Heterogeneous Talent And Trade," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(05), pages 1307-1317, December.
    20. Amoroso, Nicolás & Chiquiar, Daniel & Ramos-Francia, Manuel, 2011. "Technology and endowments as determinants of comparative advantage: Evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 164-196, August.
    21. Gene M. Grossman, 2004. "The Distribution of Talent and the Pattern and Consequences of International Trade," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 209-239, February.
    22. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
    23. Franziska Ohnsorge & Daniel Trefler, 2007. "Sorting It Out: International Trade with Heterogeneous Workers," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 868-892, October.
    24. Cheng-Te Lee & Deng-Shing Huang, 2014. "Human Capital Distribution, Growth And Trade," Bulletin of Economic Research, Wiley Blackwell, vol. 66(1), pages 45-54, January.
    25. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    26. Lai, Huiwen & Zhu, Susan Chun, 2007. "Technology, endowments, and the factor content of bilateral trade," Journal of International Economics, Elsevier, vol. 71(2), pages 389-409, April.
    27. Das Satya P, 2005. "Vertical Diversity, Communication Gap and Equilibrium Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-42, November.
    28. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amoroso, Nicolás & Chiquiar, Daniel & Ramos-Francia, Manuel, 2011. "Technology and endowments as determinants of comparative advantage: Evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 164-196, August.
    2. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
    3. Cai, Jie & Stoyanov, Andrey, 2016. "Population aging and comparative advantage," Journal of International Economics, Elsevier, vol. 102(C), pages 1-21.
    4. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    5. Arnaud Costinot, 2009. "An Elementary Theory of Comparative Advantage," Econometrica, Econometric Society, vol. 77(4), pages 1165-1192, July.
    6. Costinot, Arnaud & Komunjer, Ivana, 2006. "What Good Do Countries Trade? New Ricardian Predictions," University of California at San Diego, Economics Working Paper Series qt9t9818ng, Department of Economics, UC San Diego.
    7. William R Kerr, 2018. "Heterogeneous Technology Diffusion and Ricardian Trade Patterns," The World Bank Economic Review, World Bank, vol. 32(1), pages 163-182.
    8. Harald Fadinger & Pablo Fleiss, 2011. "Trade and Sectoral Productivity," Economic Journal, Royal Economic Society, vol. 121(555), pages 958-989, September.
    9. Antonio Ciccone & Elias Papaioannou, 2023. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," The Economic Journal, Royal Economic Society, vol. 133(649), pages 130-158.
    10. Fernandes, Ana M. & Mattoo, Aaditya & Nguyen, Huy & Schiffbauer, Marc, 2019. "The internet and Chinese exports in the pre-ali baba era," Journal of Development Economics, Elsevier, vol. 138(C), pages 57-76.
    11. Daniel Bernhofen, 2010. "The Empirics of General Equilibrium Tade Theory: What Have we Learned?," CESifo Working Paper Series 3242, CESifo.
    12. Jaimovich, Esteban, 2019. "Roadways, input sourcing, and patterns of specialization," European Economic Review, Elsevier, vol. 120(C).
    13. Heitor Pellegrina & Sebastian Sotelo, 2019. "Migration, Specialization and Trade: Evidence from the Brazilian March to the West," 2019 Meeting Papers 863, Society for Economic Dynamics.
    14. Matilde Bombardini & Giovanni Gallipoli & German Pupato, 2012. "Skill Dispersion and Trade Flows," American Economic Review, American Economic Association, vol. 102(5), pages 2327-2348, August.
    15. Kuo-Hsing Kuo & Cheng-Te Lee, 2018. "Technology Advantage, Heterogeneous Talent And Trade," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(05), pages 1307-1317, December.
    16. Cai, Jie & Stoyanov, Andrey, 2023. "Progressive income tax and comparative advantage in trade," Economic Modelling, Elsevier, vol. 129(C).
    17. Ju, Jiandong & Wei, Shang-Jin, 2011. "When is quality of financial system a source of comparative advantage?," Journal of International Economics, Elsevier, vol. 84(2), pages 178-187, July.
    18. Park, Soonchan, 2020. "Quality of transport infrastructure and logistics as source of comparative advantage," Transport Policy, Elsevier, vol. 99(C), pages 54-62.
    19. Marianna Belloc & Samuel Bowles, 2009. "International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity," Working Papers in Public Economics 126, University of Rome La Sapienza, Department of Economics and Law.
    20. Fernando Broner & Paula Bustos & Vasco Carvalho, 2011. "Sources of comparative advantage in polluting industries," Economics Working Papers 1331, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2019.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ijethy:v:19:y:2023:i:1:p:166-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.