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New trade models, different distributions, same old results?

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  • Ikizler, Burcin
  • Pehlivan, Ayse Ozgur

Abstract

In this paper we estimate Ricardian trade model of Eaton and Kortum (2002) using a different extreme value distribution, Weibull, for the productivity distributions of countries rather than the standard Fréchet assumption. The use of Weibull has the advantage of keeping elasticity of substitution in our estimation equation enabling us to account for demand effects. We find that incorporating this effect leads to lower comparative advantage parameter estimates. Additionally, we find that the state of technology (absolute advantage) rankings of the countries are similar in Weibull and Fréchet cases.

Suggested Citation

  • Ikizler, Burcin & Pehlivan, Ayse Ozgur, 2020. "New trade models, different distributions, same old results?," Economics Letters, Elsevier, vol. 187(C).
    • Handle: RePEc:eee:ecolet:v:187:y:2020:i:c:s0165176519303532
    DOI: 10.1016/j.econlet.2019.108710
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade; Technology; Extreme value distributions; Productivity;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions

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