Testing the Ricardian trade theory

The simple Ricardian model explains the comparative cost advantage by a relative productivity advantage of the single factor of production. This model is tested in this paper using microdata of the german business survey. In a first approach labour is being considered to be the only factor of production whereas in a second one capital is analysed. The results show that the former is able to explain the pattern of trade whereas the latter has no explanatory power. Therefore, labour productivity is a decisive determinant as to whether a commodity will be exported or not.