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How Robust is Comparative Advantage?

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  • Alan V. Deardorff

Abstract

This paper reviews the theoretical development of the concept of comparative advantage, starting with the two-good model of Ricardo and the two-good extension and reinterpretation by Haberler. In both, the presence of comparative advantage provides the scope for countries to gain from trade by specializing, and the pattern of that trade is explained by the pattern of comparative advantage. These strong results of the two-good model can be extended under certain circumstances to multiple goods and countries, but under more general assumptions such strong results no longer are assured. Instead one can derive much weaker results, usually in the form of correlations between comparative advantage and trade, and these weaker results hold in a much wider variety of circumstances. The paper examines those assumptions that permit such generalizations, but then also examines when those assumptions are most likely to fail, and what happens as a result. Copyright 2005 International Monetary Fund.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 5 (November)
Pages: 1004-1016

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Handle: RePEc:bla:reviec:v:13:y:2005:i:5:p:1004-1016

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  1. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Deardorff, A.V., 1993. "Exploring the Limits of Comparative Advantage," Working Papers, Research Seminar in International Economics, University of Michigan 335, Research Seminar in International Economics, University of Michigan.
  3. Deardorff, Alan V, 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(5), pages 941-57, October.
  4. Courant, P.N. & Deardorff, A.V., 1989. "International Trade With Lumpy Countries," Working Papers, Research Seminar in International Economics, University of Michigan 242, Research Seminar in International Economics, University of Michigan.
  5. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, Elsevier, vol. 9(2), pages 197-209, May.
  6. Alan V Deardorff, 2004. "Ricardian Comparative Advantage with Intermediate Inputs," Working Papers, Research Seminar in International Economics, University of Michigan 501, Research Seminar in International Economics, University of Michigan.
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Citations

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Cited by:
  1. Warziniack, Travis W. & Finnoff, David & Shogren, Jason F., 2013. "Public economics of hitchhiking species and tourism-based risk to ecosystem services," Resource and Energy Economics, Elsevier, Elsevier, vol. 35(3), pages 277-294.
  2. Takeshi Ogawa, 2013. "Application of Jones' Inequality to the n-country, m-good Ricardo–Graham Model," Economics Bulletin, AccessEcon, vol. 33(1), pages 379-387.
  3. Arnaud Costinot & Ivana Komunjer, 2007. "What Goods Do Countries Trade? New Ricardian Predictions," NBER Working Papers 13691, National Bureau of Economic Research, Inc.
  4. Mark Lutz, 2008. "Revisiting the Relevance of International Trade Theory," Forum for Social Economics, Springer, Springer, vol. 37(2), pages 147-164, August.
  5. Wignaraja, Ganeshan, 2008. "Foreign ownership, technological capabilities and clothing exports in Sri Lanka," Journal of Asian Economics, Elsevier, Elsevier, vol. 19(1), pages 29-39, February.
  6. Wignaraja, Ganeshan, 2008. "FDI and Innovation as Drivers of Export Behaviour: Firm-level Evidence from East Asia," MERIT Working Papers 061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  7. Ufuk Gunes Bebek, 2011. "Monotonicity of additive indices of revealed comparative advantage," Economics Bulletin, AccessEcon, vol. 31(2), pages 1894-1901.
  8. Dogaru, Vasile, 2005. "Some observations regarding the demythification of the comparative advantage’s principle within Manoilescu generalized scheme," MPRA Paper 6918, University Library of Munich, Germany.
  9. Dogaru, Vasile, 2005. "The general validity of comparative advantage in trade exchanges," MPRA Paper 6882, University Library of Munich, Germany.
  10. Leppälä, Samuli & Desrochers, Pierre, 2010. "The division of labor need not imply regional specialization," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 74(1-2), pages 137-147, May.

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