Simulating the Constant Cost Trade Model

Complex trade patterns characterise the present simulations of the constant cost model with three and five regions and products aggregated from the World Input-Output Database. The regions start with America, Asia and Europe trading Resources, Manufactures and Services. The sum of per capita Cobb-Douglas utility with global consumption shares is maximised for each region subject to balanced trade and global material balance. Simulations of autarky and each region trading with the rest of the world lead into full model. The global trade equilibria are characterised by export diversification, import competition and endogenous nontraded goods.