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How Robust is Comparative Advantage?

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  • Alan V. Deardorff

    (University of Michigan)

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.

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File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers526-550/r537.pdf
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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 537.

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Length: 27 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mie:wpaper:537

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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References

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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 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. 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.
  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. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, vol. 9(2), pages 197-209, May.
  5. Alan Deardorff, 1994. "Exploring the limits of comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 1-19, March.
  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. 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.
  2. Wignaraja, Ganeshan, 2008. "Foreign ownership, technological capabilities and clothing exports in Sri Lanka," Journal of Asian Economics, Elsevier, vol. 19(1), pages 29-39, February.
  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. 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.
  5. Ufuk Gunes Bebek, 2011. "Monotonicity of additive indices of revealed comparative advantage," Economics Bulletin, AccessEcon, vol. 31(2), pages 1894-1901.
  6. Leppälä, Samuli & Desrochers, Pierre, 2010. "The division of labor need not imply regional specialization," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 137-147, May.
  7. Mark Lutz, 2008. "Revisiting the Relevance of International Trade Theory," Forum for Social Economics, Springer, vol. 37(2), pages 147-164, August.
  8. Dogaru, Vasile, 2005. "The general validity of comparative advantage in trade exchanges," MPRA Paper 6882, University Library of Munich, Germany.
  9. 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).
  10. 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, vol. 35(3), pages 277-294.

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