Comparative Advantage, Exchange Rates, And Sectoral Trade Balances Of Major Industrial Countries
Document Type
Article
Publication Date
6-1-1994
Published In
International Monetary Fund Staff Papers
Abstract
This paper uses a Ricardian framework to clarify the role of micro-economic and macroeconomic factors governing the time-series and cross-sectional behavior of sectoral trade balances. Unit labor costs and trade balances are calculated for several sectors for the seven major industrial countries. The time-series and cross-sectional variation in sectoral unit labor costs is decomposed into relative productivity, wage differentials, and exchange rate variations. The main findings are that changes over time in sectoral trade balances' especially for the United States and Japan, are quite well explained by the evolution of unit labor cost, suggesting that trade patterns conform to comparative advantage. The cross-sectional results are, however, less conclusive.
Recommended Citation
Stephen S. Golub.
(1994).
"Comparative Advantage, Exchange Rates, And Sectoral Trade Balances Of Major Industrial Countries".
International Monetary Fund Staff Papers.
Volume 41,
Issue 2.
286-313.
DOI: 10.2307/3867510
https://works.swarthmore.edu/fac-economics/61