This paper reconsiders one of the fundamental results in trade theory: the law of comparative advantage from an empirical point of view. The contribution of this paper is to conduct a test of the law of comparative advantage that is consistent with both balanced and unbalanced trade. To do so, this paper utilizes not only net exports valued at autarky prices but also those valued at free trade prices. The results support the empirical validity of the law of comparative advantage even after trade imbalances are taken into account.
- Law of comparative advantage
- Trade imbalances
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)