Stefania Garetto from Boston University will present "No Sugar Coating: Quantifying the Welfare Losses from the US-Cuba Trade Policy" (joint with Franco Maldonado Carlin and Marie Petkus)

Abstract: What are the consequences of comparative advantage-driven specialization for developing countries navigating uncertain international relations? We address this question by studying the Cuban economy in the first half of the twentieth century through the lens of a quantitative Ricardian model of trade. Using newly digitized historical trade data, we recover Cuba’s revealed comparative advantage before and after the imposition of large trade barriers on its main product, sugar. We perform a counterfactual analysis to provide a quantitative answer to a long-standing question about the Cuban economy: the 'road not taken'. What would the Cuban economy have looked like in later years if its economic integration had remained the same as at the beginning of the twentieth century? The answer to this question sheds light on our understanding of the possible consequences of trade policy for extremely specialized developing countries.