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 three-country 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. In the model, countries that are far from their export markets will have low wages and tend to specialize in high value/weight products, which will be shipped on airplanes. Less remote exporters will have higher wages, and will tend to specialize in low value/weight products which will be sent by ship, train, or truck. These implications are confirmed using detailed data on U.S. imports from 1990 to 2003. Distance from the US is associated with much higher import unit values, an indication that the model identifies a quantitatively important influence on specialization and trade"--National Bureau of Economic Research web site.
