Discussion paper

DP15160 Empirical Productivity Distributions and International Trade

This paper reassesses the question of the importance of comparative advantage in a model of international trade with heterogeneous firms where productivity is distributed nonparametrically. This assessment rests on a method of isolating empirical productivity distributions for 15 countries and 17 sectors using a combination of firm-level and macroeconomic data together with the structure of the model. In this setting, the effects of technology on trade are substantial and cannot be captured by a small set of technology parameters. On average, comparative advantage accounts for 23% of the observed variation in trade or 70\% in the absence of selection effects.


Egger, P, K Erhardt and S Nigai (2020), ‘DP15160 Empirical Productivity Distributions and International Trade‘, CEPR Discussion Paper No. 15160. CEPR Press, Paris & London. https://cepr.org/publications/dp15160