Aug 16, 2010

Was Ricardo right?

Here is a short note I wrote on the gains of comparative advantage export specialization (CAES). I developed a new inidex and find that it accounts for 34% of the variance in GDP per capita across countries. Let me know what you think!

2 comments:

Sebastian said...

Sounds like a good idea and the graphs come out really nice. I just have one little doubt: You do the index by multiplying the z score with a share and then sum over all industries. But is it not the case that countries that are poorer will have in all sectors a lower z-score so the index will always be lower for poor countries? If this is the case then you may prefer to use some alternative to the z-score that you compute across countries for each industry...what you need is a measure that tells you whether the country produces the goods it produces best ..what you have is something like a mix of this and the general efficiency of the country, if I understand right....

Laura Z said...

nice (I still have to read it carefully). isn't it a bit of a problem tough for your conclusion that agriculture (and services, but this is hard to get) are not accounted for?