Comparative Advantage in Mining

Tilton, J.E. (1983). Comparative Advantage in Mining. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-83-091

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Abstract

Substantial shifts in the geographic location of mining have taken place over the last three decades. These shifts, and the underlying factors causing them, are examined in this study of six important metallic commodities--bauxite, copper, iron, nickel, tin, and zinc.

The widely held belief that the developed countries, due to the exhaustion of their own mineral resources, are becoming increasingly dependent on the developing countries for the important minerals needed by their advanced economies receives little support. It is true that the United States and other highly industrialized countries have seen their share of world mineral production fall. However, the growth of mining in Australia, Canada, and South Africa has largely offset this decline.

This study also concludes that the factor endowment theory of international trade is of some use in analyzing resource production and trade. A positive and generally significant relationship is found between reserves and production, which suggests that a sizable portion of the inter-country variation in mining can be attributed to differences in mineral endowment. The theory, however, offers no insights into why mineral endowments change over time, causing substantial shifts in the comparative advantage of mining. This, along with other identified shortcomings, means the factor endowment theory provides at best an incomplete explanation of mineral trade and production.

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