W3 empirical tests of ricardian model

Question 1

reasons why Ricardian model is difficult

Answer 1

Too simple 2x2x1 - in the complex world, different trade theories may have the similar results Having only 1 factor of production is way too simplistic a view of manufacturing

Trade pattern predicted by CA from Autarky to trade is almost not observable (because we rarely have data on Autarky)

In real world, almost no country produces only the goods in which they have a comparative advantage.

Complete specialisation: if the model is right then there are goods that countries don’t produce at all (not true from data)

Question 2

what is the empirical test of MacDougall (1951) and its advantages?

Answer 2

1. instead of looking at the bilateral trade between US and UK, MacDougall looked at the exports to the rest of the world

advantages: tariffs between Us and Uk varied widely and Tariffs set by the world to US and UK are similar.

Question 3

what is the Bernhofen and Brown (2004) ricardian model test

Answer 3

test that compares autarky with trade
(problem is how to get the data of the autarky)

makes innovative progress on this issue by exploiting Japan’s sudden and complete opening up to international trade in the 1860s

Question 4

Ricardian model empirical tests

Answer 4

MacDougall (1951)
Bernhofen and Brown (2004)