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Fragility of Comparative Advantage in Higher Dimensions: An Experimental Investigation

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  • Baboo M Nowbutsing

Abstract

In this study, an experimental analysis of the fragility of the law of the comparative advantage in higher dimensions is performed. Noussair et al (1995) invoked a trading environment similar to the 2 x 2 Competitive Ricardian Model (CRM) and observed the law of comparative advantage. In this experiment, the same experimental setting is invoked however the number of goods and countries is increased. There were three countries and three goods, two countries were categorised as ‘intermediate’ comparative advantage while one as ‘extreme’ comparative advantage. However, the Jones (1961)’s criterion for optimal assignment was satisfied. The experimental findings reveal the following (1) both the autarky model and the competitive model are rejected as a representation of the data but the competitive model performs better than the autarky model (2) the CRM does not predict the production pattern (3) the CRM does not predict pattern of trade (4) output prices do not converge to the prediction of the theoretical model. Thus the results support the claim of Deardoff (2005).

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  • Baboo M Nowbutsing, 2011. "Fragility of Comparative Advantage in Higher Dimensions: An Experimental Investigation," Journal of Economics and Behavioral Studies, AMH International, vol. 2(4), pages 151-170.
    • Handle: RePEc:rnd:arjebs:v:2:y:2011:i:4:p:151-170
    DOI: 10.22610/jebs.v2i4.233
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    References listed on IDEAS

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    1. Alan V Deardorff, 2011. "How Robust is Comparative Advantage?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 17, pages 183-195, World Scientific Publishing Co. Pte. Ltd..
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    8. Noussair, C.N. & Plott, C. & Riezman, R., 2007. "Production, trade and exchange rates in large experimental economies," Other publications TiSEM 3bf683fe-0650-4e8a-8682-c, Tilburg University, School of Economics and Management.
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    Cited by:

    1. Baboo M Nowbutsing, 2012. "Experiments in International Economics," Journal of Economics and Behavioral Studies, AMH International, vol. 4(2), pages 75-86.

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