Ricardo's Theory of Comparative Advantage-Old Idea New Evidence-Costinot and Donaldson
NBER WORKING PAPER SERIES
RICARDO 'S THEORY OF COMPARATIVE ADVANTAGE:
OLD IDEA, NEW EVIDENCE
Arnaud Costinot
Dave Donaldson
Working Paper 17969 http://www.nber.org/papers/w17969 NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
April 2012
We thank Pol Antràs, Chang-Tai Hsieh, and Esteban Rossi-Hansberg for comments and Meredith
McPhail and Cory Smith for excellent research assistance. This paper has been prepared for the 2012
American Economic Review Papers and Proceedings. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official
NBER publications.
© 2012 by Arnaud Costinot and Dave Donaldson. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including
© notice, is given to the source.
Ricardo 's Theory of Comparative Advantage: Old Idea, New Evidence
Arnaud Costinot and Dave Donaldson
NBER Working Paper No. 17969
April 2012
JEL No. F11,Q11,Q15,Q17,R14
ABSTRACT
When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo 's theory of comparative advantage '. Truth, however, in Samuelson 's reply refers to the fact that Ricardo 's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo 's ideas.
We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those
RICARDO 'S THEORY OF COMPARATIVE ADVANTAGE:
OLD IDEA, NEW EVIDENCE
Arnaud Costinot
Dave Donaldson
Working Paper 17969 http://www.nber.org/papers/w17969 NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
April 2012
We thank Pol Antràs, Chang-Tai Hsieh, and Esteban Rossi-Hansberg for comments and Meredith
McPhail and Cory Smith for excellent research assistance. This paper has been prepared for the 2012
American Economic Review Papers and Proceedings. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official
NBER publications.
© 2012 by Arnaud Costinot and Dave Donaldson. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including
© notice, is given to the source.
Ricardo 's Theory of Comparative Advantage: Old Idea, New Evidence
Arnaud Costinot and Dave Donaldson
NBER Working Paper No. 17969
April 2012
JEL No. F11,Q11,Q15,Q17,R14
ABSTRACT
When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo 's theory of comparative advantage '. Truth, however, in Samuelson 's reply refers to the fact that Ricardo 's theory of comparative advantage is mathematically correct, not that it is empirically valid. The goal of this paper is to assess the empirical performance of Ricardo 's ideas.
We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. Crucially, this dataset contains information about the productivity of each parcel of land in all crops, not just those
References: Costinot, Arnaud. 2009. “An Elementary Theory of Comparative Advantage.” Econometrica 77(4): 1165-1192. Costinot, Arnaud, and Dave Donaldson. 2011. “How Large Are the Gains from Economic Integration? Evidence from US Agriculture 1880-2000.” Unpublished. Costinot, Arnaud, Dave Donaldson, and Ivana Komunjer. 2011. “What Goods Do Countries Trade? A Quantitative Exploration of Ricardo’ Ideas.” Review of Economic Studies forthcoming. Deardor¤, Alan. 1984. “Testing Trade Theories and Predicting Trade Flows.”Handbook of International Economics, Volume 1, R.W Eaton, Jonathan, and Samuel Kortum. 2002. “Technology, Geography, and Trade.” Econometrica 70(5): 1741-1779. Heckman, James, and Bo Honore. 1990. “The Empirical Content of the Roy Model.” Econometrica 58(5): 1121-1149. IIASA/FAO. 2012. Global Agro-ecological Zones (GAEZ v3.0). IIASA, Laxenburg, Austria and FAO, Rome, Italy. Nunn, Nathan and Nancy Qian. 2011. “The Potato’ Contribution to Population and Urbanization: s Samuelson, Paul A. 1995. “The Past and the Future of International Trade Theory.”In New Directions in Trade Theory, edited by Jim Levinsohn, Alan V