Gravity Models versus Comparative Advantage: It is not enough for trade to be free; trade should also be fit
Bibliographic record
Abstract
Trade-gravity equations remain the empirical “workhorse” for bilateral flows, yet their strictly positive orientation can normalise volumes that depart from welfare-maximising cost allocations. Building on a friction-adjusted theory of comparative advantage, this article pairs gravity’s descriptive power with two normative indicators. First, a Cost-Based Comparative Advantage (CCA) index ranks exporters by total landed cost—combining f.o.b. factory prices with good-specific freight, insurance and policy wedges—for every product–destination pair. Second, the Redirection Advantage (CBRA) metric tests whether diverting an exporter’s incumbent shipments toward an alternative market would lower that market’s import bill, thereby revealing latent efficiency losses masked by path dependence, preferential agreements or behavioural frictions. Applying the framework to the densely intertwined Canada–United States corridor uncovers sizeable but highly asymmetric misallocations. Canadian aerospace producers could undercut incumbent suppliers in several European and Gulf economies by more than US$3,000 per kg, while U.S. petroleum refiners enjoy occasional triple-digit mark-ups inWest Africa and the Caribbean. By contrast, cross-border automotive and most energy exchanges exhibit negative CBRA values, signalling that the prevailing North-American supply chains are already cost-efficient. The results demonstrate how proximity, home-market bias and rules of origin can simultaneously stimulate large trade volumes and conceal Viner-style trade diversion. The study advances three contributions: (i) a tractable, product-level toolkit for diagnosing cost-inefficient trade; (ii) a theoretical bridge that embeds comparative-advantage logic inside a multi-country gravity structure; and (iii) a policy agenda that combines multilateral tariff cuts, infrastructure upgrades and real-time cost monitoring to align observed flows with global cost minima. Integrating CCA and CBRA with gravity thus offers researchers and policymakers a unified lens for ensuring that “who trades with whom” also reflects “who should trade with whom.”
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.005 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.002 | 0.002 |
| Science and technology studies | 0.001 | 0.006 |
| Scholarly communication | 0.003 | 0.007 |
| Open science | 0.001 | 0.003 |
| Research integrity | 0.001 | 0.002 |
| Insufficient payload (model declined to judge) | 0.015 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".