Publication:

The Ricardian Model: theoretical and empirical review

The Ricardian Model is the most widely explained theory in International Economics. Despite its pedagogical importance in this field, its empirical performance is not exempted from controversies. According to this classical model, relative productivities across counties determine trade patterns. On this article, in the model’s 200th anniversary, the classical theory is presented along with some extensions and a model where its empirical performance is analyzed. In this model relative productivity and unit labor costs are analyzed as drivers of German and French trade patterns. The results show that coefficients seem to be correctly signed and are statistically significant, even though much of the trade patterns remain to be unexplained. Therefore, other models are necessary to fully explain trade patterns between Germany and France.