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Does complexity explain the structure of trade?
Author(s) -
Mido Asier,
RequenaSilvente Francisco
Publication year - 2013
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12033
Subject(s) - commodity , comparative advantage , production (economics) , economics , world trade , developing country , process (computing) , international trade , econometrics , microeconomics , computer science , market economy , economic growth , operating system
This paper analyzes whether complexity, measured by the number of skilled tasks that are performed in production, explains countries’ commodity trade structure. We modify the Romalis model to incorporate advantage differences in complexity across commodities together with differences in the number of mistakes made by workers in the production process in developed and developing countries as a source of comparative advantage. Our model predicts that the share of developed countries in world trade increases with products’ complexity. Empirical tests confirm this prediction. Moreover, we find that complexity complements the explanation provided by skill‐intensity on countries’ commodity trade structure.