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How Robust is Comparative Advantage?

  • Alan V. Deardorff

    (University of Michigan)

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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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
Contact details of provider: Postal: ANN ARBOR MICHIGAN 48109
Web page: http://fordschool.umich.edu/rsie/

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  1. Alan Deardorff, 1994. "Exploring the limits of comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 1-19, March.
  2. Courant, P.N. & Deardorff, A.V., 1989. "International Trade With Lumpy Countries," Working Papers 242, Research Seminar in International Economics, University of Michigan.
  3. Alan V Deardorff, 2004. "Ricardian Comparative Advantage with Intermediate Inputs," Working Papers 501, Research Seminar in International Economics, University of Michigan.
  4. 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.
  5. Deardorff, Alan V, 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 941-57, October.
  6. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, vol. 9(2), pages 197-209, May.
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