The Evolution of Comparative Advantage: Measurement and Welfare Implications
We estimate productivities at the sector level for 72 countries and 5 decades, and examine how they evolve over time in both developed and developing countries. In both country groups, comparative advantage has become weaker: productivity grew systematically faster in sectors that were initially at greater comparative disadvantage. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. In the counterfactual scenario in which each country's comparative advantage remained the same as in the 1960s, and technology in all sectors grew at the same country-specific average rate, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. In this counterfactual scenario, welfare is also 1.6% higher for the median country compared to the baseline. The welfare impact varies greatly across countries, ranging from -1.1% to +4.3% among OECD countries, and from -4.6% to +41.9% among non-OECD countries.
We are grateful to the editor (Francesco Caselli), two anonymous referees, Costas Arkolakis, Alan Deardor, Chris House, Francesc Ortega, Dmitriy Stolyarov, Linda Tesar, Michael Waugh, Kei-Mu Yi, and participants at numerous seminars and conferences for helpful suggestions, and to Andrew McCallum, Lin Ma, and Nitya Pandalai Nayar for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Levchenko, Andrei A. & Zhang, Jing, 2016. "The evolution of comparative advantage: Measurement and welfare implications," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 96-111. citation courtesy of