DP1554 Country Size and Comparative Advantage: An Empirical Study

Author(s): Johan Torstensson
Publication Date: January 1997
Keyword(s): Comparative Advantage, Country Size, Economic Geography, Trade
JEL(s): F12, F14
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1554

We formulate a simple model that captures two recent hypotheses: (i) that countries with an abundant absolute endowment of skilled labour will be net exporters in R&D-intensive industries; and (ii) that countries with a large domestic market will be net exporters in scale-intensive industries. The hypotheses are empirically tested by studying the trade of each and every OECD country individually. Thereafter, we pool the data into one regression by introducing, simultaneously, country and industry characteristics. The results offer relatively strong support for hypothesis (i) and some support for hypothesis (ii).