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Capabilities, wealth, and trade

Sutton, John and Trefler, Daniel (2016) Capabilities, wealth, and trade. Journal of Political Economy, 124 (3). pp. 826-878. ISSN 0022-3808

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Identification Number: 10.1086/686034


We explore the relation between a country’s income and the mix of products it exports. Both are simultaneously determined by countries’ capabilities, that is, by countries’ productivity and quality levels for each good. Our theoretical setup has two features. (1) Some goods have fewer high-quality producers/countries than others, meaning that there is comparative advantage. (2) Imperfect competition allows high- and low-quality producers to coexist. These two features generate an inverted-U, general equilibrium relationship between a country’s export mix and its GDP per capita. We show that this inverted-U permeates the international data on trade and GDP per capita.

Item Type: Article
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Additional Information: © 2016 University of Chicago Press
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
Date Deposited: 24 Oct 2018 09:01
Last Modified: 20 Oct 2021 02:26

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