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Competitive versus Comparative Advantage

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  • J. Peter Neary

    (University College Dublin, and the Centre for Economic Policy Research, London)

Abstract

I explore the interactions between comparative, competitive and absolute advantage in a two-country model of oligopoly in general equilibrium. Comparative advantage always determines the direction of trade, but both competitive and absolute advantage affect resource allocation, trade patterns and trade volumes. Competitive advantage in the sense of more home firms drives foreign firms out of marginal sectors but also makes some marginal home sectors uncompetitive. Absolute advantage in the sense of a uniform fall in home costs tends to raise home output in all sectors but also leads both countries to specialise less in accordance with comparative advantage. Copyright � 2003 Blackwell Publishers Ltd (a Blackwell Publishing Company).

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 26 (2003)
Issue (Month): 4 (04)
Pages: 457-470

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Handle: RePEc:bla:worlde:v:26:y:2003:i:4:p:457-470

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References

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  1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  2. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  3. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," CEPR Discussion Papers 3420, C.E.P.R. Discussion Papers.
  4. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
  5. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School Of Economics, University College Dublin.
  6. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  7. Weinstein, David E., 1992. "Competition and unilateral dumping," Journal of International Economics, Elsevier, vol. 32(3-4), pages 379-388, May.
  8. Brakman, Steven & Heijdra, Ben J., 2002. "The monopolistic competition revolution in retrospect," CCSO Working Papers 200215, University of Groningen, CCSO Centre for Economic Research.
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Citations

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Cited by:
  1. Neary, J Peter, 2006. "Measuring Competitiveness," CEPR Discussion Papers 5982, C.E.P.R. Discussion Papers.
  2. Bertrand Crettez & Marie-Cécile Fagart, 2005. "Does Entry Improve Welfare ? A General Equilibrium Approach of Competition Policy," Working Papers 2005-08, Centre de Recherche en Economie et Statistique.
  3. Yomogida, Morihiro, 2008. "Competition, technology, and trade in oligopolistic industries," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 127-137.
  4. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
  5. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
  6. Kikuchi, Toru & Shimomua, Koji, 2008. "Comparative Advantage and Trade Liberalization in a Chamberlinian-Ricardian Model," MPRA Paper 8199, University Library of Munich, Germany.
  7. Roberto Basile & Luca De Benedictis, 2004. "Regional Unemployment and Productivity in Europe and the US," ERSA conference papers ersa04p38, European Regional Science Association.
  8. Daniel Lederman & William F. Maloney, 2012. "Does What You Export Matter? In Search of Empirical Guidance for Industrial Policies," World Bank Publications, The World Bank, number 9371, October.
  9. Klinger, Bailey & Lederman, Daniel, 2004. "Discovery and development : an empricial exploration of"new"products," Policy Research Working Paper Series 3450, The World Bank.
  10. Toru Kikuchi, 2008. "Economic Integration in a Chamberlinian-Ricardian World," EERI Research Paper Series EERI_RP_2008_07, Economics and Econometrics Research Institute (EERI), Brussels.
  11. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
  12. Lee, Chaehwa & Wilhelm, Wilbert, 2010. "On integrating theories of international economics in the strategic planning of global supply chains and facility location," International Journal of Production Economics, Elsevier, vol. 124(1), pages 225-240, March.
  13. J Peter Neary, 2002. "Globalisation and Market Structure," Working Papers 200220, School Of Economics, University College Dublin.
  14. Neary, J. Peter, 2009. "Two and a Half Theories of Trade," CEPR Discussion Papers 7600, C.E.P.R. Discussion Papers.
  15. G.A. Minerva, 2006. "Natural Advantage, Location and Trade Patterns in Increasing Returns to Scale Industries," Working Papers 560, Dipartimento Scienze Economiche, Universita' di Bologna.
  16. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.

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