Airplanes and comparative advantage

Airplanes are a fast but expensive means of shipping goods a fact which has implications for comparative advantage The paper develops a Ricardian model with a continuum of goods which vary by weight and hence transport cost Comparative advantage depends on relative air and surface transport costs across countries and goods as well as stochastic productivity A key testable implication is that the U S should Import heavier goods from nearby countries and lighter goods from faraway counties This implication is tested using detailed data on US Imports from 1990 to 2003 Looking across goods the US imports nearby exporters have lower market share in goods that the rest of the world ships by air Looking across exporters for individual goods distance from the US is associated with much higher import unit values These effects are large which establish that the model identifies an important influence on specialization and trade (C) 2010 Elsevier B V All rights reserved