The evolution of comparative advantage: Measurement and welfare implications

Abstract

Using novel estimates of sectoral total factor productivities for 72 countries across 5 decades we provide evidence of relative productivity convergence: productivity grew systematically faster in initially relatively less productive sectors. These changes have had a significant impact on trade volumes and patterns, and a non-negligible welfare impact. Had productivity in each country׳s manufacturing sector relative to the US remained the same as in the 1960s, trade volumes would be higher, cross-country export patterns more dissimilar, and intra-industry trade lower than in the data. Relative sectoral productivity convergence – holding average growth fixed – had a modest negative welfare impact.