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A world trade model with bilateral trade based on comparative advantage

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  • Anders Hammer Strømman
  • Faye Duchin

Abstract

This paper describes an extension of Duchin's world trade model to include the explicit representation of transportation costs, permitting the endogenous determination of bilateral trade flows and region-specific prices. The original model is a linear program that, based on comparative advantage and the minimization of factor use, determines regional production and trade flows as well as world prices and scarcity rents for m regions, n good, and k factors. The new world trade model with bilateral trade achieves its objectives by introducing transportation services and geographically dependent transportation requirements for each traded good and each pair of potential trade partners. The formulation of this model and its major properties are presented, and results from a preliminary analysis with 11 regions, eight goods, four transportation sectors, and six factors of production are reported and compared with corresponding results from the world trade model. On the basis of this comparison, we conclude that transportation costs have little impact on a region's total imports or exports of a given commodity.

Suggested Citation

  • Anders Hammer Strømman & Faye Duchin, 2006. "A world trade model with bilateral trade based on comparative advantage," Economic Systems Research, Taylor & Francis Journals, vol. 18(3), pages 281-297.
    • Handle: RePEc:taf:ecsysr:v:18:y:2006:i:3:p:281-297
    DOI: 10.1080/09535310600844300
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    1. Faye Duchin, 2005. "A world trade model based on comparative advantage with m regions, n goods, and k factors," Economic Systems Research, Taylor & Francis Journals, vol. 17(2), pages 141-162.
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    1. Hansen, Mark & Smirti, Megan & Zou, Bo, 2008. "A Comparative Evaluation of Greenhouse Gas Emission Reduction Strategies for the Maritime Shipping and Aviation Sectors," University of California Transportation Center, Working Papers qt4j3573wm, University of California Transportation Center.
    2. Jan Streeck & Stefan Pauliuk & Hanspeter Wieland & Dominik Wiedenhofer, 2023. "A review of methods to trace material flows into final products in dynamic material flow analysis: From industry shipments in physical units to monetary input–output tables, Part 1," Journal of Industrial Ecology, Yale University, vol. 27(2), pages 436-456, April.
    3. Tarancon, Miguel Angel & Del Río, Pablo, 2012. "Assessing energy-related CO2 emissions with sensitivity analysis and input-output techniques," Energy, Elsevier, vol. 37(1), pages 161-170.
    4. Alexandre Tisserant & Stefan Pauliuk, 2016. "Matching global cobalt demand under different scenarios for co-production and mining attractiveness," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-19, December.
    5. Foster-McGregor, Neil & Nomaler, Önder & Verspagen, Bart, 2021. "Job Automation Risk, Economic Structure and Trade: a European Perspective," Research Policy, Elsevier, vol. 50(7).
    6. Wiedmann, Thomas, 2009. "A review of recent multi-region input-output models used for consumption-based emission and resource accounting," Ecological Economics, Elsevier, vol. 69(2), pages 211-222, December.
    7. Pathairat Pastpipatkul & Petchaluck Boonyakunakorn & Kanyaphon Phetsakda, 2020. "The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model," Economies, MDPI, vol. 8(1), pages 1-13, January.
    8. Lindstad, Haakon & Asbjørnslett, Bjørn E. & Strømman, Anders H., 2011. "Reductions in greenhouse gas emissions and cost by shipping at lower speeds," Energy Policy, Elsevier, vol. 39(6), pages 3456-3464, June.
    9. Carlos A. L�pez-Morales & Faye Duchin, 2015. "Economic Implications Of Policy Restrictions On Water Withdrawals From Surface And Underground Sources," Economic Systems Research, Taylor & Francis Journals, vol. 27(2), pages 154-171, June.
    10. Chen, Z.M. & Chen, G.Q., 2011. "Embodied carbon dioxide emission at supra-national scale: A coalition analysis for G7, BRIC, and the rest of the world," Energy Policy, Elsevier, vol. 39(5), pages 2899-2909, May.
    11. Rocco, Matteo V. & Golinucci, Nicolò & Ronco, Stefano M. & Colombo, Emanuela, 2020. "Fighting carbon leakage through consumption-based carbon emissions policies: Empirical analysis based on the World Trade Model with Bilateral Trades," Applied Energy, Elsevier, vol. 274(C).
    12. Alexandre Tisserant & Stefan Pauliuk, 2016. "Matching global cobalt demand under different scenarios for co-production and mining attractiveness," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-19, December.
    13. Kirsten Svenja Wiebe & Eivind Lekve Bjelle & Johannes Többen & Richard Wood, 2018. "Implementing exogenous scenarios in a global MRIO model for the estimation of future environmental footprints," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-18, December.
    14. Faye Duchin & Stephen Levine, 2015. "Rents in the era of resource scarcity: global payment flows under alternative scenarios," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-17, December.
    15. Wiedmann, Thomas & Lenzen, Manfred & Turner, Karen & Barrett, John, 2007. "Examining the global environmental impact of regional consumption activities -- Part 2: Review of input-output models for the assessment of environmental impacts embodied in trade," Ecological Economics, Elsevier, vol. 61(1), pages 15-26, February.

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