MULTILATERAL COMPARATIVE ADVANTAGE AND NET EXPORTS

Complex trade patterns arise due to classical relative price competition in the present aggregations of three, four, and five regions and products from the World Input–Output Database. The unit labor input rankings as relative prices, lead to the revealed terms of trade providing the best fit to bilateral net exports. This multilateral approach leads to diversified exports and import competing production with substantial two-way trade and instances of nontrading countries, as well as effectively nontraded goods. The results correctly predicting the directions of about three-quarters of bilateral net exports support the insight of Ricardo.