Using a comprehensive international trade data set we document empirical power laws for the distribution of the interaction between countries as measured by revealed comparative advantage. Using the recently developed estimator by Gabaix and Ibragimov (forthcoming) we find strong evidence in favor of power laws along the time, country, and sector dimension for three different levels of data aggregation. This finding is not predicted by any of the existing trade theories. The estimated power law exponents characterizing the distribution of revealed comparative advantage are stable over time but differ between countries and sectors. These differences are related empirically to country and sector characteristics, including population size, GDP, and factor intensities.
- Revealed comparative advantage,
- Balassa index,
- power law,
- Zipf’s Law
Available at: http://works.bepress.com/hinloopen/11/