Country Size, Technology, and Ricardian Comparative Advantage

Author Name ARA Tomohiro (Fukushima University)
Creation Date/NO. February 2015 15-E-023
Research Project Trade and Industrial Policies in a Complex World Economy
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First Draft: Feburuary 2015
Revised: Feburuary 2019


We develop a Ricardian model with heterogeneous firms in which country size and technology play a crucial role in the firm-level variables. We show that a country with larger size and higher technology exhibits higher productivity and lower price-cost margins even under assumptions of C.E.S. preferences and monopolistic competition. Welfare is higher in this country, not only due to increased product variety but also due to increased competition in a domestic market. We also show that country size and technology impact critically on the intensive margin as well as the extensive margin in the gravity equation.

Published: Ara, Tomohiro, 2020. "Country Size, Technology, and Ricardian Comparative Advantage," Review of International Economics, Vol. 28(2), pp. 303-564