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An Inframarginal Analysis of the Ricardian Model

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  • Cheng, Wenli
  • Sachs, Jeffrey
  • Yang, Xiaokai

Abstract

This paper shows that a 2 x 2 Ricardian model has a unique general equilibrium, and the comparative statics of the equilibrium involve discontinuous jumps. If partial division of labor occurs in equilibrium, the country producing both goods would impose a tariff, whereas the country producing a single good would prefer unilateral free trade. If complete division of labor occurs in equilibrium, both countries would negotiate to achieve free trade. In a model with three countries, the country which does not have a comparative advantage relative to the other two countries, and/or which has low transaction efficiency, may be excluded from trade. Copyright 2000 by Blackwell Publishing Ltd.

Suggested Citation

  • Cheng, Wenli & Sachs, Jeffrey & Yang, Xiaokai, 2000. "An Inframarginal Analysis of the Ricardian Model," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 208-220, May.
  • Handle: RePEc:bla:reviec:v:8:y:2000:i:2:p:208-20
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Cheng, Wenli & Zhang, Dingsheng, 2016. "How might the South be helped by Northern technology yet harmed by Northern money?," Economic Modelling, Elsevier, vol. 55(C), pages 83-91.
    2. Jeffrey Sachs & Xiaokai Yang & Dingsheng Zhang, 2005. "Globalization, Dual Economy, And Economic Development," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 16, pages 349-382 World Scientific Publishing Co. Pte. Ltd..
    3. Soo, Kwok Tong, 2017. "Indivisibilities in the Ricardian model of trade," Economic Modelling, Elsevier, vol. 63(C), pages 311-317.
    4. Zhihao Yu, 2003. "IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade," Carleton Economic Papers 03-06, Carleton University, Department of Economics.
    5. Xiaokai Yang & Dingsheng Zhang, 2005. "Endogenous Structure Of The Division Of Labor, Endogenous Trade Policy Regime, And A Dual Structure In Economic Development," World Scientific Book Chapters,in: An Inframarginal Approach To Trade Theory, chapter 17, pages 383-406 World Scientific Publishing Co. Pte. Ltd..
    6. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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