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The Ricardian Model

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Author Info

  • Alan V. Deardorff

    (The University of Michigan)

Abstract

This essay was written for the Princeton Encyclopedia of the World Economy. The Ricardian Model describes a world in which goods are competitively produced from a single factor of production, labor, using constant-returns-to-scale technologies that differ across countries and goods. With only two goods and two countries, the standard textbook model shows that countries will export the good in which they have comparative advantage. Equilibrium takes two forms, one with both countries completely specialized and gaining from trade, the other with one country producing both goods and neither gaining nor losing from trade. The model is easily extended to more than two goods or more than two countries, but not both. Important extensions have been provided by Dornbusch, Fischer, and Samuelson (1977) to a continuum of goods with two countries, and by Eaton and Kortum (2002) to a continuum of goods with many countries and random technologies.

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File URL: http://fordschool.umich.edu/rsie/workingpapers/Papers551-575/r564.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 564.

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Length: 18 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mie:wpaper:564

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Web page: http://www.fordschool.umich.edu/rsie/
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Related research

Keywords: Ricardian Model; Comparative Advantage;

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References

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  1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  2. 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.
  3. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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Cited by:
  1. Hejazi, Mina & Grant, Jason, 2013. "Do Trade Costs Affect the Extensive Margin of Trade? Lessons from U.S. Fresh Fruits and Vegetables Imports," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150226, Agricultural and Applied Economics Association.

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