Empirical Evidence on the Ricardian Model
The Ricardian model of international trade is an extremely useful tool for thinking about
the reasons why trade may happen and about the effects of international trade on national
welfare. But is the model a good fit to the real world? Does the Ricardian model make
accurate predictions about actual international trade flows?
The answer is a heavily qualified yes. Clearly there are a number of ways in which the
Ricardian model makes misleading predictions. First, as mentioned in our discussion of
nontraded goods, the simple Ricardian model predicts an extreme degree of specialization
that we do not observe in the real world. Second, the Ricardian model assumes away
effects of international trade on the distribution of income within countries, and thus
predicts that countries as a whole will always gain from trade; in practice, international
trade has strong effects on income distribution. Third, the Ricardian model allows no role
for differences in resources among countries as a cause of trade, thus missing an important
aspect of the trading system (the focus of Chapters 4 and 5). Finally, the Ricardian
model neglects the possible role of economies of scale as a cause of trade, which leaves
it unable to explain the large trade flows between apparently similar nations—an issue
discussed in Chapters 7 and 8.
In spite of these failings, however, the basic prediction of the Ricardian model—that
countries should tend to export those goods in which their productivity is relatively high—
has been strongly confirmed by a number of studies over the years.
Several classic tests of the Ricardian model, performed using data from the early post-
World War II period, compared British with American productivity and trade.4 This was
an unusually illuminating comparison, because it revealed that British labor productivity
was lower than American productivity in almost every sector. As a result, the United
States had an absolute advantage in everything. Nonetheless, the amount of overall British
exports was about as large as the amount of American exports at the time. Despite its
lower absolute productivity, there must have been some sectors in which Britain had a
comparative advantage. The Ricardian model would predict that these would be the sectors
in which the United States’ productivity advantage was smaller.
Figure 3-6 illustrates the evidence in favor of the Ricardian model, using data presented
in a paper by the Hungarian economist Bela Balassa in 1963. The figure compares the
ratio of U.S. to British exports in 1951 with the ratio of U.S. to British labor productivity
for 26 manufacturing industries. The productivity ratio is measured on the horizontal axis,
the export ratio on the vertical axis. Both axes are given a logarithmic scale, which turns
out to produce a clearer picture.
Ricardian theory would lead us broadly to expect that the higher the relative productivity
in the U.S. industry, the more likely U.S. rather than U.K. firms would export in that
industry. And that is what Figure 3-6 shows. In fact, the scatterplot lies quite close to an
upward-sloping line, also shown in the figure. Bearing in mind that the data used for this
comparison are, like all economic data, subject to substantial measurement errors, the fit is
remarkably close.
As expected, the evidence in Figure 3-6 confirms the basic insight that trade depends on
comparative, not absolute advantage. At the time to which the data refer, U.S. industry
had much higher labor productivity than British industry—on average about twice as high.
4The pioneering study by G. D. A. MacDougall is listed in Further Readings at the end of the chapter. A wellknown
follow-up study, on which we draw here, was Bela Balassa, “An Empirical Demonstration of Classical
Comparative Cost Theory,” Review of Economics and Statistics 45 (August 1963), pp. 231–238; we use Balassa’s
numbers as an illustration.
46 PART ONE International Trade Theory
The commonly held misconception that a country can be competitive only if it can match
other countries’ productivity, which we discussed earlier in this chapter, would have led
one to predict a U.S. export advantage across the board. The Ricardian model tells us,
however, that having high productivity in an industry compared with that of foreigners is
not enough to ensure that a country will export that industry’s products; the relative productivity
must be high compared with relative productivity in other sectors. As it happened,
U.S. productivity exceeded British productivity in all 26 sectors (indicated by dots)
shown in Figure 3-6, by margins ranging from 11 to 366 percent. In 12 of the sectors, however,
Britain actually had larger exports than the United States. A glance at the figure
shows that, in general, U.S. exports were larger than U.K. exports only in industries where
the U.S. productivity advantage was somewhat more than two to one.
More recent evidence on the Ricardian model has been less clear-cut. In part, this is
because the growth of world trade and the resulting specialization of national economies
means that we do not get a chance to see what countries do badly! In the world economy of
the 21st century, countries often do not produce goods for which they are at a comparative
disadvantage, so there is no way to measure their productivity in those sectors. For example,
most countries do not produce airplanes, so there are no data on what their unit labor
requirements would be if they did. Nonetheless, several pieces of evidence suggest that differences
in labor productivity continue to play an important role in determining world trade
patterns.
Perhaps the most striking demonstration of the continuing usefulness of the Ricardian
theory of comparative advantage is the way it explains the emergence of China as an export
powerhouse in some industries. Overall, Chinese labor productivity in manufacturing,
although rising, remains very low by American or European standards. In some industries,
however, the Chinese productivity disadvantage is not as large as it is on average—and in
these industries, China has become one of the world’s largest producers and exporters.
Table 3-3 illustrates this point with some estimates based on 1995 data. The researchers
compared Chinese output and productivity with that of Germany in a number of industries.
On average, they found that Chinese productivity was only 5 percent that of Germany, and
Ratio of
U.S./British
exports
Ratio of
U.S./British
productivity
4
2
1
.5
.25
.125
.5 1 2 4 8
Figure 3-6
Productivity and Exports
A comparative study showed that
U.S. exports were high relative to
British exports in industries in
which the United States had high
relative labor productivity. Each
dot represents a different industry.
CHAPTER 3 Labor Productivity and Comparative Advantage: The Ricardian Model 47
that in 1995, total Chinese manufacturing output was still almost 30 percent less than
Germany’s total manufacturing production.
In apparel (that is, clothing), however, Chinese productivity was closer to German levels.
China still had an absolute disadvantage in clothing production, with only about a fifth
of German productivity. But because China’s relative productivity in apparel was so much
higher than in other industries, China had a strong comparative advantage in apparel—and
China’s apparel industry was eight times the size of Germany’s apparel industry.
In sum, while few economists believe that the Ricardian model is a fully adequate description
of the causes and consequences of world trade, its two principal implications—that
productivity differences play an important role in international trade and that it is comparative
rather than absolute advantage that matters—do seem to be supported by the evidence.
SUMMARY
1. We examined the Ricardian model, the simplest model that shows how differences
between countries give rise to trade and gains from trade. In this model, labor is the
only factor of production, and countries differ only in the productivity of labor in different
industries.
2. In the Ricardian model, countries will export goods that their labor produces relatively
efficiently and will import goods that their labor produces relatively inefficiently. In
other words, a country’s production pattern is determined by comparative advantage.
3. We can show that trade benefits a country in either of two ways. First, we can think of
trade as an indirect method of production. Instead of producing a good for itself, a
country can produce another good and trade it for the desired good. The simple model
shows that whenever a good is imported, it must be true that this indirect “production”
requires less labor than direct production. Second, we can show that trade enlarges a
country’s consumption possibilities, which implies gains from trade.
4. The distribution of the gains from trade depends on the relative prices of the goods countries
produce. To determine these relative prices, it is necessary to look at the relative world
supply and demand for goods. The relative price implies a relative wage rate as well.
5. The proposition that trade is beneficial is unqualified. That is, there is no requirement that
a country be “competitive” or that the trade be “fair.” In particular, we can show that three
commonly held beliefs about trade are wrong. First, a country gains from trade even if it
has lower productivity than its trading partner in all industries. Second, trade is beneficial
even if foreign industries are competitive only because of low wages. Third, trade is beneficial
even if a country’s exports embody more labor than its imports.
6. Extending the one-factor, two-good model to a world of many commodities does not
alter these conclusions. The only difference is that it becomes necessary to focus
TABLE 3-3 China versus Germany, 1995
Chinese Output per Worker
as % of Germany
Total Chinese Output as
% of Germany
All manufacturing 5.2 71.6
Apparel 19.7 802.2
Source: Ren Ruoen and Bai Manying, “China’s Manufacturing Industry in an International Perspective:
A China-Germany Comparison,” Economie internationale, no. 92–2002/4, pp. 103–130.
48 PART ONE International Trade Theory
directly on the relative demand for labor to determine relative wages rather than to
work via relative demand for goods. Also, a many-commodity model can be used to
illustrate the important point that transportation costs can give rise to a situation in
which some goods are nontraded.
7. While some of the predictions of the Ricardian model are clearly unrealistic, its basic
prediction—that countries will tend to export goods in which they have relatively high
productivity—has been confirmed by a number of studies.
KEY TERMS
absolute advantage, p. 29
comparative advantage, p. 26
derived demand, p. 42
gains from trade, p. 34
general equilibrium
analysis, p. 31
nontraded goods, p. 44
opportunity cost, p. 25
partial equilibrium analysis, p. 30
pauper labor argument, p. 37
production possibility
frontier, p. 27
relative demand curve, p. 31
relative supply curve, p. 31
relative wage, p. 35
Ricardian model, p. 26
unit labor requirement, p. 26
PROBLEMS
1. Home has 1,200 units of labor available. It can produce two goods, apples and bananas.
The unit labor requirement in apple production is 3, while in banana production it is 2.
a. Graph Home’s production possibility frontier.
b. What is the opportunity cost of apples in terms of bananas?
c. In the absence of trade, what would the price of apples in terms of bananas be?
Why?
2. Home is as described in problem 1. There is now also another country, Foreign, with a
labor force of 800. Foreign’s unit labor requirement in apple production is 5, while in
banana production it is 1.
a. Graph Foreign’s production possibility frontier.
b. Construct the world relative supply curve.
3. Now suppose world relative demand takes the following form: Demand for apples/demand
for bananas = price of bananas/price of apples.
a. Graph the relative demand curve along with the relative supply curve.
b. What is the equilibrium relative price of apples?
c. Describe the pattern of trade.
d. Show that both Home and Foreign gain from trade.
4. Suppose that instead of 1,200 workers, Home has 2,400. Find the equilibrium relative
price. What can you say about the efficiency of world production and the division of
the gains from trade between Home and Foreign in this case?
5. Suppose that Home has 2,400 workers, but they are only half as productive in both
industries as we have been assuming. Construct the world relative supply curve and
determine the equilibrium relative price. How do the gains from trade compare with
those in the case described in problem 4?
6. “Chinese workers earn only $.75 an hour; if we allow China to export as much as it
likes, our workers will be forced down to the same level. You can’t import a $10 shirt
without importing the $.75 wage that goes with it.” Discuss.
7. Japanese labor productivity is roughly the same as that of the United States in the
manufacturing sector (higher in some industries, lower in others), while the United
States is still considerably more productive in the service sector. But most services are
CHAPTER 3 Labor Productivity and Comparative Advantage: The Ricardian Model 49
nontraded. Some analysts have argued that this poses a problem for the United States,
because our comparative advantage lies in things we cannot sell on world markets.
What is wrong with this argument?
8. Anyone who has visited Japan knows it is an incredibly expensive place; although
Japanese workers earn about the same as their U.S. counterparts, the purchasing
power of their incomes is about one-third less. Extend your discussion from question
7 to explain this observation. (Hint: Think about wages and the implied prices of nontraded
goods.)
9. How does the fact that many goods are nontraded affect the extent of possible gains
from trade?
10. We have focused on the case of trade involving only two countries. Suppose that there
are many countries capable of producing two goods, and that each country has only
one factor of production, labor. What could we say about the pattern of production
and trade in this case? (Hint: Try constructing the world relative supply curve.)
FURTHER READINGS
Donald Davis. “Intraindustry Trade: A Heckscher-Ohlin-Ricardo Approach.” Journal of International
Economics 39 (November 1995), pp. 201–226. A recent revival of the Ricardian approach to
explain trade between countries with similar resources.
Rudiger Dornbusch, Stanley Fischer, and Paul Samuelson. “Comparative Advantage, Trade and
Payments in a Ricardian Model with a Continuum of Goods.” American Economic Review 67
(December 1977), pp. 823–839. More recent theoretical modeling in the Ricardian mode, developing
the idea of simplifying the many-good Ricardian model by assuming that the number of
goods is so large as to form a smooth continuum.
Giovanni Dosi, Keith Pavitt, and Luc Soete. The Economics of Technical Change and International
Trade. Brighton: Wheatsheaf, 1988. An empirical examination that suggests that international trade
in manufactured goods is largely driven by differences in national technological competencies.
Stephen Golub and Chang-Tai Hsieh. “Classical Ricardian Theory of Comparative Advantage
Revisited.” Review of International Economics 8(2), 2000, pp. 221–234. A modern statistical
analysis of the relationship between relative productivity and trade patterns, which finds reasonably
strong correlations.
G. D. A. MacDougall. “British and American Exports: A Study Suggested by the Theory of
Comparative Costs.” Economic Journal 61 (December 1951), pp. 697–724; 62 (September
1952), pp. 487–521. In this famous study, MacDougall used comparative data on U.S. and U.K.
productivity to test the predictions of the Ricardian model.
John Stuart Mill. Principles of Political Economy. London: Longmans, Green, 1917. Mill’s 1848
treatise extended Ricardo’s work into a full-fledged model of international trade.
David Ricardo. The Principles of Political Economy and Taxation. Homewood, IL: Irwin, 1963. The
basic source for the Ricardian model is Ricardo himself in this book, first published in 1817.
The Ricardian model of international trade is an extremely useful tool for thinking about
the reasons why trade may happen and about the effects of international trade on national
welfare. But is the model a good fit to the real world? Does the Ricardian model make
accurate predictions about actual international trade flows?
The answer is a heavily qualified yes. Clearly there are a number of ways in which the
Ricardian model makes misleading predictions. First, as mentioned in our discussion of
nontraded goods, the simple Ricardian model predicts an extreme degree of specialization
that we do not observe in the real world. Second, the Ricardian model assumes away
effects of international trade on the distribution of income within countries, and thus
predicts that countries as a whole will always gain from trade; in practice, international
trade has strong effects on income distribution. Third, the Ricardian model allows no role
for differences in resources among countries as a cause of trade, thus missing an important
aspect of the trading system (the focus of Chapters 4 and 5). Finally, the Ricardian
model neglects the possible role of economies of scale as a cause of trade, which leaves
it unable to explain the large trade flows between apparently similar nations—an issue
discussed in Chapters 7 and 8.
In spite of these failings, however, the basic prediction of the Ricardian model—that
countries should tend to export those goods in which their productivity is relatively high—
has been strongly confirmed by a number of studies over the years.
Several classic tests of the Ricardian model, performed using data from the early post-
World War II period, compared British with American productivity and trade.4 This was
an unusually illuminating comparison, because it revealed that British labor productivity
was lower than American productivity in almost every sector. As a result, the United
States had an absolute advantage in everything. Nonetheless, the amount of overall British
exports was about as large as the amount of American exports at the time. Despite its
lower absolute productivity, there must have been some sectors in which Britain had a
comparative advantage. The Ricardian model would predict that these would be the sectors
in which the United States’ productivity advantage was smaller.
Figure 3-6 illustrates the evidence in favor of the Ricardian model, using data presented
in a paper by the Hungarian economist Bela Balassa in 1963. The figure compares the
ratio of U.S. to British exports in 1951 with the ratio of U.S. to British labor productivity
for 26 manufacturing industries. The productivity ratio is measured on the horizontal axis,
the export ratio on the vertical axis. Both axes are given a logarithmic scale, which turns
out to produce a clearer picture.
Ricardian theory would lead us broadly to expect that the higher the relative productivity
in the U.S. industry, the more likely U.S. rather than U.K. firms would export in that
industry. And that is what Figure 3-6 shows. In fact, the scatterplot lies quite close to an
upward-sloping line, also shown in the figure. Bearing in mind that the data used for this
comparison are, like all economic data, subject to substantial measurement errors, the fit is
remarkably close.
As expected, the evidence in Figure 3-6 confirms the basic insight that trade depends on
comparative, not absolute advantage. At the time to which the data refer, U.S. industry
had much higher labor productivity than British industry—on average about twice as high.
4The pioneering study by G. D. A. MacDougall is listed in Further Readings at the end of the chapter. A wellknown
follow-up study, on which we draw here, was Bela Balassa, “An Empirical Demonstration of Classical
Comparative Cost Theory,” Review of Economics and Statistics 45 (August 1963), pp. 231–238; we use Balassa’s
numbers as an illustration.
46 PART ONE International Trade Theory
The commonly held misconception that a country can be competitive only if it can match
other countries’ productivity, which we discussed earlier in this chapter, would have led
one to predict a U.S. export advantage across the board. The Ricardian model tells us,
however, that having high productivity in an industry compared with that of foreigners is
not enough to ensure that a country will export that industry’s products; the relative productivity
must be high compared with relative productivity in other sectors. As it happened,
U.S. productivity exceeded British productivity in all 26 sectors (indicated by dots)
shown in Figure 3-6, by margins ranging from 11 to 366 percent. In 12 of the sectors, however,
Britain actually had larger exports than the United States. A glance at the figure
shows that, in general, U.S. exports were larger than U.K. exports only in industries where
the U.S. productivity advantage was somewhat more than two to one.
More recent evidence on the Ricardian model has been less clear-cut. In part, this is
because the growth of world trade and the resulting specialization of national economies
means that we do not get a chance to see what countries do badly! In the world economy of
the 21st century, countries often do not produce goods for which they are at a comparative
disadvantage, so there is no way to measure their productivity in those sectors. For example,
most countries do not produce airplanes, so there are no data on what their unit labor
requirements would be if they did. Nonetheless, several pieces of evidence suggest that differences
in labor productivity continue to play an important role in determining world trade
patterns.
Perhaps the most striking demonstration of the continuing usefulness of the Ricardian
theory of comparative advantage is the way it explains the emergence of China as an export
powerhouse in some industries. Overall, Chinese labor productivity in manufacturing,
although rising, remains very low by American or European standards. In some industries,
however, the Chinese productivity disadvantage is not as large as it is on average—and in
these industries, China has become one of the world’s largest producers and exporters.
Table 3-3 illustrates this point with some estimates based on 1995 data. The researchers
compared Chinese output and productivity with that of Germany in a number of industries.
On average, they found that Chinese productivity was only 5 percent that of Germany, and
Ratio of
U.S./British
exports
Ratio of
U.S./British
productivity
4
2
1
.5
.25
.125
.5 1 2 4 8
Figure 3-6
Productivity and Exports
A comparative study showed that
U.S. exports were high relative to
British exports in industries in
which the United States had high
relative labor productivity. Each
dot represents a different industry.
CHAPTER 3 Labor Productivity and Comparative Advantage: The Ricardian Model 47
that in 1995, total Chinese manufacturing output was still almost 30 percent less than
Germany’s total manufacturing production.
In apparel (that is, clothing), however, Chinese productivity was closer to German levels.
China still had an absolute disadvantage in clothing production, with only about a fifth
of German productivity. But because China’s relative productivity in apparel was so much
higher than in other industries, China had a strong comparative advantage in apparel—and
China’s apparel industry was eight times the size of Germany’s apparel industry.
In sum, while few economists believe that the Ricardian model is a fully adequate description
of the causes and consequences of world trade, its two principal implications—that
productivity differences play an important role in international trade and that it is comparative
rather than absolute advantage that matters—do seem to be supported by the evidence.
SUMMARY
1. We examined the Ricardian model, the simplest model that shows how differences
between countries give rise to trade and gains from trade. In this model, labor is the
only factor of production, and countries differ only in the productivity of labor in different
industries.
2. In the Ricardian model, countries will export goods that their labor produces relatively
efficiently and will import goods that their labor produces relatively inefficiently. In
other words, a country’s production pattern is determined by comparative advantage.
3. We can show that trade benefits a country in either of two ways. First, we can think of
trade as an indirect method of production. Instead of producing a good for itself, a
country can produce another good and trade it for the desired good. The simple model
shows that whenever a good is imported, it must be true that this indirect “production”
requires less labor than direct production. Second, we can show that trade enlarges a
country’s consumption possibilities, which implies gains from trade.
4. The distribution of the gains from trade depends on the relative prices of the goods countries
produce. To determine these relative prices, it is necessary to look at the relative world
supply and demand for goods. The relative price implies a relative wage rate as well.
5. The proposition that trade is beneficial is unqualified. That is, there is no requirement that
a country be “competitive” or that the trade be “fair.” In particular, we can show that three
commonly held beliefs about trade are wrong. First, a country gains from trade even if it
has lower productivity than its trading partner in all industries. Second, trade is beneficial
even if foreign industries are competitive only because of low wages. Third, trade is beneficial
even if a country’s exports embody more labor than its imports.
6. Extending the one-factor, two-good model to a world of many commodities does not
alter these conclusions. The only difference is that it becomes necessary to focus
TABLE 3-3 China versus Germany, 1995
Chinese Output per Worker
as % of Germany
Total Chinese Output as
% of Germany
All manufacturing 5.2 71.6
Apparel 19.7 802.2
Source: Ren Ruoen and Bai Manying, “China’s Manufacturing Industry in an International Perspective:
A China-Germany Comparison,” Economie internationale, no. 92–2002/4, pp. 103–130.
48 PART ONE International Trade Theory
directly on the relative demand for labor to determine relative wages rather than to
work via relative demand for goods. Also, a many-commodity model can be used to
illustrate the important point that transportation costs can give rise to a situation in
which some goods are nontraded.
7. While some of the predictions of the Ricardian model are clearly unrealistic, its basic
prediction—that countries will tend to export goods in which they have relatively high
productivity—has been confirmed by a number of studies.
KEY TERMS
absolute advantage, p. 29
comparative advantage, p. 26
derived demand, p. 42
gains from trade, p. 34
general equilibrium
analysis, p. 31
nontraded goods, p. 44
opportunity cost, p. 25
partial equilibrium analysis, p. 30
pauper labor argument, p. 37
production possibility
frontier, p. 27
relative demand curve, p. 31
relative supply curve, p. 31
relative wage, p. 35
Ricardian model, p. 26
unit labor requirement, p. 26
PROBLEMS
1. Home has 1,200 units of labor available. It can produce two goods, apples and bananas.
The unit labor requirement in apple production is 3, while in banana production it is 2.
a. Graph Home’s production possibility frontier.
b. What is the opportunity cost of apples in terms of bananas?
c. In the absence of trade, what would the price of apples in terms of bananas be?
Why?
2. Home is as described in problem 1. There is now also another country, Foreign, with a
labor force of 800. Foreign’s unit labor requirement in apple production is 5, while in
banana production it is 1.
a. Graph Foreign’s production possibility frontier.
b. Construct the world relative supply curve.
3. Now suppose world relative demand takes the following form: Demand for apples/demand
for bananas = price of bananas/price of apples.
a. Graph the relative demand curve along with the relative supply curve.
b. What is the equilibrium relative price of apples?
c. Describe the pattern of trade.
d. Show that both Home and Foreign gain from trade.
4. Suppose that instead of 1,200 workers, Home has 2,400. Find the equilibrium relative
price. What can you say about the efficiency of world production and the division of
the gains from trade between Home and Foreign in this case?
5. Suppose that Home has 2,400 workers, but they are only half as productive in both
industries as we have been assuming. Construct the world relative supply curve and
determine the equilibrium relative price. How do the gains from trade compare with
those in the case described in problem 4?
6. “Chinese workers earn only $.75 an hour; if we allow China to export as much as it
likes, our workers will be forced down to the same level. You can’t import a $10 shirt
without importing the $.75 wage that goes with it.” Discuss.
7. Japanese labor productivity is roughly the same as that of the United States in the
manufacturing sector (higher in some industries, lower in others), while the United
States is still considerably more productive in the service sector. But most services are
CHAPTER 3 Labor Productivity and Comparative Advantage: The Ricardian Model 49
nontraded. Some analysts have argued that this poses a problem for the United States,
because our comparative advantage lies in things we cannot sell on world markets.
What is wrong with this argument?
8. Anyone who has visited Japan knows it is an incredibly expensive place; although
Japanese workers earn about the same as their U.S. counterparts, the purchasing
power of their incomes is about one-third less. Extend your discussion from question
7 to explain this observation. (Hint: Think about wages and the implied prices of nontraded
goods.)
9. How does the fact that many goods are nontraded affect the extent of possible gains
from trade?
10. We have focused on the case of trade involving only two countries. Suppose that there
are many countries capable of producing two goods, and that each country has only
one factor of production, labor. What could we say about the pattern of production
and trade in this case? (Hint: Try constructing the world relative supply curve.)
FURTHER READINGS
Donald Davis. “Intraindustry Trade: A Heckscher-Ohlin-Ricardo Approach.” Journal of International
Economics 39 (November 1995), pp. 201–226. A recent revival of the Ricardian approach to
explain trade between countries with similar resources.
Rudiger Dornbusch, Stanley Fischer, and Paul Samuelson. “Comparative Advantage, Trade and
Payments in a Ricardian Model with a Continuum of Goods.” American Economic Review 67
(December 1977), pp. 823–839. More recent theoretical modeling in the Ricardian mode, developing
the idea of simplifying the many-good Ricardian model by assuming that the number of
goods is so large as to form a smooth continuum.
Giovanni Dosi, Keith Pavitt, and Luc Soete. The Economics of Technical Change and International
Trade. Brighton: Wheatsheaf, 1988. An empirical examination that suggests that international trade
in manufactured goods is largely driven by differences in national technological competencies.
Stephen Golub and Chang-Tai Hsieh. “Classical Ricardian Theory of Comparative Advantage
Revisited.” Review of International Economics 8(2), 2000, pp. 221–234. A modern statistical
analysis of the relationship between relative productivity and trade patterns, which finds reasonably
strong correlations.
G. D. A. MacDougall. “British and American Exports: A Study Suggested by the Theory of
Comparative Costs.” Economic Journal 61 (December 1951), pp. 697–724; 62 (September
1952), pp. 487–521. In this famous study, MacDougall used comparative data on U.S. and U.K.
productivity to test the predictions of the Ricardian model.
John Stuart Mill. Principles of Political Economy. London: Longmans, Green, 1917. Mill’s 1848
treatise extended Ricardo’s work into a full-fledged model of international trade.
David Ricardo. The Principles of Political Economy and Taxation. Homewood, IL: Irwin, 1963. The
basic source for the Ricardian model is Ricardo himself in this book, first published in 1817.
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