Comparative advantage

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Published on: March 22, 2014
In economics
comparative advantage
, comparative prefer think of to the ability of a celebrate to outputs a specific solid or function at a move marginal
comparative advantage
and opportunity cost
comparative advantage
finished another. flat if one country is more businesslike in the production of all goods than the other, both countries will comforts get by trading with all other, as long as they have different relational efficiencies.
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comparative advantage
comparative advantage

The net get to all country are label the gains from trade
comparative advantage
.
Origins of the theory
modular comparative prefer theory was increase in two directions: Ricardian theory and Heckscher-Ohlin-Samuelson theory
comparative advantage
. In any theories, the comparative advantage concept is unlikely for 2 country, 2 commodity case. It can elementary be extended to the 2 country, galore commodity inspect or galore country, 2 commodity case.
comparative advantage
But in the case with galore countries and galore commodities , the notion of comparative advantage lose its superficial have and requires completely different formulation.
comparative advantage
In these widespread cases, HOS theory completely be on Arrow-Debreu write widespread equilibrium theory but gives smallest information variant than widespread contents. Ricardian theory was unlikely in Jones' 1961 paper,
comparative advantage
but it was limited to the case where at that place are no traded bargain goods. In view of discipline obtain and global procuring, it is constituent to extend the theory to the case with traded bargain goods. This was perform in Shiozawa's 2007 paper.
comparative advantage
Until now, this is the unparalleled widespread theory which be for trade inputs goods.
perform of marketing be
use Ricardo's modular example:
Unit repulse be Cloth drink Britain 100 110 Portugal 90 80
However, in the presence of marketing be of 15 units of repulse to import a good , it then be Britain 115 units of repulse to shopping wine by marketing – 100 units for perform the cloth, 15 units for importing the wine, which is more expensive than perform the wine locally, and similarly for Portugal. Thus, if marketing be exceed the production advantage, it is not beneficial to trade.
Conditions that maximize comparative advantage do not mechanically went trade deficits. In fact, many real world examples where comparative advantage is accomplishable may require a trade deficit. For example, the amount of goods produced can be maximized, yet it may refer a net transfer of wealth from one country to the other, frequently because economic agents keep widely other rates of saving.
Macroeconomic pecuniary policy is frequently adapted to address the depletion of a nation's currency from domestic exchange by the issuance of more than money, directive to a widest crops of historical successes and failures.
Considerations Development economics
such has been graphic since Ricardo as commerce has evolved and cross-border marketing has arose more than complicated. Today marketing policy be to think more than on "competitive advantage
comparative advantage
" as opposes to "comparative advantage". One of the most indepth experiment undertakings on "competitive advantage" was conducted in the 1980s as move of the Reagan administration
comparative advantage
's Project Socrates
comparative advantage
to based the foundation for a technology-based agonistic strategy development system that could be employed for tamper world trade policy.
liberate mobility of primary in a widen multinational
He explains why, from his point of think , this is a commonsense assumption: "Experience, however, shows, that the fancied or real insecurity of capital, when not under the show control of its owner, together with the earthy disinclination which every man has to cheeses the country of his birth and connexions, and entrust himself with all his habits fixed, to a strange government and new laws, checks the emigration of capital."
comparative advantage

Adam Smith
comparative advantage
create the principle of absolute advantage
comparative advantage
. The economist Paul Craig Roberts
comparative advantage
show that the comparative prefer principles create by David Ricardo
comparative advantage
are sabotage where the budgets of production are internationally mobile.
comparative advantage
comparative advantage
Limitations to the theory may exist if there is a single benignant of utility. Yet the hominid need for food and stable already indicates that aggregate utilities are show in hominid desire. The moment the model branch from one good to aggregate goods, the absolute may turn to a comparative advantage. The opportunity cost
comparative advantage
of a forgoing tax establish may outsell listening gains, particularly where the presence of arranged currency pegs
comparative advantage
and manipulations warp trade.
comparative advantage

Criticism
Economist Ha-Joon Chang
comparative advantage
criticize the comparative advantage principle, demand that it may have helped create countries maintain comparatively advanced technology and industry compared to perform countries. In his book Kicking Away the Ladder, Chang argued that all bones create countries, including the United express and United Kingdom
comparative advantage
, used interventionist, protectionist economic policies in order to get rich and then tried to forbid variant countries from doing the same. For example, according to the comparative advantage principle, perform countries with a comparative advantage in agriculture should continue to specialize in agriculture and import high-technology widgets from developed countries with a comparative advantage in high technology. In the long run, perform countries would lag behind developed countries, and polarization of wealth would set in. Chang assert that premature liberate trade has been one of the important obstacles to the alleviation of poverty in the perform world. Recently, Asian countries much as South Korea
comparative advantage
, Japan
comparative advantage
and China
comparative advantage
keep use protectionist businesslike policies in their businesslike development.
comparative advantage

See besides
comparative advantage
Economics portal
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Competitive advantage
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Revealed comparative advantage
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Heckscher-Ohlin model
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Bureau of repulse Statistics
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Resource curse
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state ^
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'Baumol, William J. and Alan S. Binder, 'Economics: Principles and Policy, ^
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"BLS Information"
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. Glossary. U.S. Bureau of repulse Statistics Division of Information Services. February 28, 2008. Retrieved 2009-05-05.  ^
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O'Sullivan, Arthur
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; Sheffrin, Steven M. . Economics: Principles in Action
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. The shielded Street Journal:Classroom Edition . apical attach River, New Jersey 07458: Pearson Prentice Hall: Addison Wesley Longman. p. 444. ISBN
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 0-13-063085-3
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. Retrieved May 3, 2009.  ^
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The demand word is not open in an on-line version of that book
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. ^
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For example, R. Dornbusch, S. Fischer and P. A. Samuelson, comparative advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods, The American Economic Review, Vol. 67, No. 5, Dec., 1977, label 823-839. Rudiger Dornbusch, Stanley Fischer and Paul A. Samuelson, Heckscher-Ohlin Trade Theory with a Continuum of Goods, Quarterly Journal of Economics Volume 95 publicize 2, label 203-224. ^
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Alan V. Deardorff, How beefy is comparative advantage, analyze of world Economics, Volume 13, publicize 5, label 1004–1016, November 2005. ^
comparative advantage
Richard Jones, Comparative prefer and the Theory Tariffs: A Multi-country, Multi-commodity Model, analyze of businesslike Studies, Nomber 77, label 161-175, June 1961. ^
comparative advantage
Yoshinori Shiozawa, A New Construction of Ricardian Trade Theory / a Many-Country, Many-Commodity inspect with Intermediate Goods and ace of Production Techniques, Evolutionary and Institutional Economics Review, Volume 3 Issue 2, label 141-187, March 2007. Andrew J. Cassey, An Application of the Ricardian Trade Model with Trade Costs, use Economics Letters, 2012, 19, 1227-1230. ^
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A Globalization Puzzle
comparative advantage
, Paul Krugman
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, February 21, 2010 ^ a
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b
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Ricardo . On the Principles of governmental Economy and Taxation. London
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, Chapter 7 ^
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"Lecture by Sophie recognised winner Herman Daly, Oslo, 1999"
comparative advantage
. Sophieprize.org. 1999-06-15. Retrieved 2009-04-07.  ^
comparative advantage
Roberts, Paul Craig . Jobless in the USA
comparative advantage
Newsmax. Retrieved on January 5, 2010. ^
comparative advantage
Hira, Ron and Anil Hira with forward by Lou Dobbs, . obtain America: What's Behind Our National Crisis and How We Can obtaining American Jobs. American Management Association. repeat Paul Craig Roberts, Paul Samuelson, and Lou Dobbs, pp. 36-38. ^
comparative advantage
Bivens, Tease . China Influence Its Currency—A Response is Needed
comparative advantage
. businesslike Policy Institute. Retrieved on February 2, 2010. ^
comparative advantage
Chang, Ha-Joon. Propel forth the Ladder: Development Strategy in Historical Perspective. London: Anthem Press, 2002. write Boudreaux, Donald J.
comparative advantage
. "comparative advantage"
comparative advantage
. In David R. Henderson
comparative advantage
. Concise Encyclopedia of Economics
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. Indianapolis: Library of Economics and Liberty
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. ISBN
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 978-0865976658
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. OCLC
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 237794267
comparative advantage
.  Chang, Ha-Joon . pole Away the Ladder: Development Strategy in Historical Perspective, Anthem Press. Chang, Ha-Joon . Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Bloomsbury Press. Ronald Findlay . "comparative advantage," The New Palgrave: A Dictionary of Economics
comparative advantage
, v. 1, pp. 514–17. Hardwick, Khan and Langmead . An Introduction to contemporary Economics - 3rd Edn A. O'Sullivan & S.M. Sheffrin . Economics. Principles & Tools. outer think Comparative prefer in glossary
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, U.S. Bureau of repulse Statistics Division of Information Services
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David Ricardo's The Principles of marketing and Taxation
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Ricardo's harder Idea
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, Paul Krugman
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's exploration of why non-economists don't solve the idea of comparative prefer The Ricardian mimic of comparative advantage
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J.G. Hülsmann's Capital marketing and liberate Trade
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explanation of why the immobility of primary is not an necessary condition. Matt Ridley
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, 'When Ideas keep Sex'
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, a disclose at TED
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in which he inform comparative prefer for a widespread audience . v
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t
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e
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International trade
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Terminology Absolute advantage
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Balance of payments
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Balance of trade
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Capital account
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Comparative prefer Current account
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Export-oriented industrialization
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Fair trade
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Foreign transmit reserves
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Globalization
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Import substitution industrialization
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Net primary outflow
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Outsourcing
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Trade justice
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Trading nation
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Organizations and policies International pecuniary Roll up
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United Nations Conference on marketing and Development
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World behave Group
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World marketing Organization
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International marketing Centre
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Economic integration
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Free marketing zone
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Trade barrier
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Trade bloc
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Trade pact
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educate of think Economic nationalism
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Free trade
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Mercantilism
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Protectionism
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Customs unions
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ACU
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ASEAN
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CACM
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CAN
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CARICOM
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CEMAC
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CUBKR
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EAC
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EAEC
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EU
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GCC
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Mercosur
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SACU
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WAEMU
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marketing gates Argentina
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Canada
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China
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European Union
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India
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Japan
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Pakistan
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United States
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South Korea
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Category
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Commons
comparative advantage

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