Accounting for trade patterns

Stephen J. Redding, David E. Weinstein

Research output: Contribution to journalArticlepeer-review


We develop a quantitative framework for decomposing trade patterns. We derive price indexes that determine comparative advantage and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average appeal (including quality), and the dispersion of appeal-adjusted prices. We show that they are only weakly related to standard empirical measures of average prices. We find that 40 percent of the cross-section variation in comparative advantage, and 90 percent of the time-series variation, is accounted for by variety and average appeal, with less than 10 percent attributed to average prices.

Original languageEnglish (US)
Article number103910
JournalJournal of International Economics
StatePublished - Jul 2024

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Comparative advantage
  • Prices
  • Quality
  • Trade
  • Variety


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