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American Economic Review: Vol. 102 No. 3 (May 2012)
AER Volume. 102, Issue 3 | 
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Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence
Article Citation
Costinot, Arnaud, and
Dave Donaldson. 2012. "Ricardo's Theory of Comparative Advantage: Old Idea, New Evidence."
American Economic Review,
102(3): 453-58.
DOI: 10.1257/aer.102.3.453
DOI: 10.1257/aer.102.3.453
Abstract
When asked to name one proposition in the social sciences that is both true and non-trivial, Paul Samuelson famously replied: 'Ricardo's theory of comparative advantage'. Truth, however, in Samuelson's reply refers to the fact that Ricardo's theory of comparative advantage is mathematically correct, not that it is empirically valid. In this paper we develop and implement an empirical test of Ricardo's ideas. We use novel agricultural data that describe the productivity in 17 crops of 1.6 million parcels of land in 55 countries around the world. We find that a regression of log observed output on log predicted output has a (precisely estimated) slope of 0.84 and an R-squared of 0.93. In our view, these findings offer considerable support for Ricardo's ideas.
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Authors
Costinot, Arnaud (MIT)
Donaldson, Dave (MIT)
Donaldson, Dave (MIT)
JEL Classifications
F11: Neoclassical Models of Trade
