COMPARATIVE ADVANTAGE, GEOGRAPHIC ADVANTAGE AND THE VOLUME OF TRADE

Develops a model where the direction of trade between countries in more than two commodities is determinate yet countries are incompletely specialised in production. The volume of trade in any good depends on the degree of comparative advantage in that good. In particular, if for each good in the model one deflates the value of a country's net exports by the value of world consumption, one obtains a variable which is an increasing function of that country's degree of comparative advantage. This suggests a procedure for constructing the dependent variable in empirical work when the volume of a country's trade is being regressed on characteristics of goods indicating its degree of comparative advantage. The key difference between the model of this paper and standard international trade models is the existence of per-unit-distance transportation costs within a country. These costs, combined with the assumption that cities are the basic units of spatial organisation in a country, lead the model to predict that population sizes, wage rates, and residential rental rates of cities will all decline monotonically as one moves inland from a coastal port. These new results are derived jointly with the relationship between comparative advantage and the volume of trade and thus add to the plausibility of the particular approach to establishing that relationship that is pursued here. -from Author