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Power laws and comparative advantage

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  • Jeroen Hinloopen
  • Charles van Marrewijk

Abstract

Using a comprehensive international trade data set we document empirical Power Laws (PLs) for the distribution of the interaction between countries as measured by revealed comparative advantage. Using the recently developed estimator by Gabaix and Ibragimov (2011), we find strong evidence in favour of PLs along the time, country and sector dimension for three different levels of data aggregation. This finding is not predicted by any of the existing trade theories. The estimated PL exponents characterizing the distribution of revealed comparative advantage are stable over time but differ between countries and sectors. These differences are related empirically to country and sector characteristics, including population size, Gross Domestic Product (GDP) and factor intensities.

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  • Jeroen Hinloopen & Charles van Marrewijk, 2012. "Power laws and comparative advantage," Applied Economics, Taylor & Francis Journals, vol. 44(12), pages 1483-1507, April.
    • Handle: RePEc:taf:applec:44:y:2012:i:12:p:1483-1507
    DOI: 10.1080/00036846.2010.543079
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    1. Igor Fedotenkov, 2020. "A Review of More than One Hundred Pareto-Tail Index Estimators," Statistica, Department of Statistics, University of Bologna, vol. 80(3), pages 245-299.
    2. Steven Brakman & Charles Van Marrewijk, 2017. "A closer look at revealed comparative advantage: Gross-versus value-added trade flows," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 61-92, March.
    3. Ignacio Rosal, 2018. "Power laws in EU country exports," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(2), pages 311-337, May.
    4. Maureen Lankhuizen & Thomas De Graaff & Henri De Groot, 2012. "Product Heterogeneity, Intangible Barriers & Distance Decay: The effect of multiple dimensions of distance on trade across different product categories," ERSA conference papers ersa12p151, European Regional Science Association.
    5. Steven Brakman & Harry Garretsen & Charles Van Marrewijk & Arjen Van Witteloostuijn, 2013. "Cross‐Border Merger & Acquisition Activity and Revealed Comparative Advantage in Manufacturing Industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 28-57, March.
    6. Maureen B. M. Lankhuizen & Thomas De Graaff & Henri L. F. de Groot, 2015. "Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade across Different Product Categories," Spatial Economic Analysis, Taylor & Francis Journals, vol. 10(2), pages 137-159, June.
    7. Michał Brzeziński, 2013. "Robust estimation of the Pareto index: A Monte Carlo Analysis," Working Papers 2013-32, Faculty of Economic Sciences, University of Warsaw.

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