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Competitive versus comparative advantage

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  • J. Peter Neary

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.

Suggested Citation

  • J. Peter Neary, 2002. "Competitive versus comparative advantage," Working Papers 200219, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200219
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    File URL: http://hdl.handle.net/10197/1325
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    References listed on IDEAS

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    1. Carsten Eckel & Leonardo Iacovone & Beata Javorcik & J. Peter Neary, 2016. "Testing the Core-competency Model of Multi-product Exporters," Review of International Economics, Wiley Blackwell, pages 699-716.
    2. J. Peter Neary, 2001. "Foreign competition and wage inequality," Working Papers 200102, School of Economics, University College Dublin.
    3. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, pages 680-693.
    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, pages 823-839.
    5. Weinstein, David E., 1992. "Competition and unilateral dumping," Journal of International Economics, Elsevier, pages 379-388.
    6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    7. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, pages 536-561.
    8. J. Peter Neary, 2000. "Monopolistic competition and international trade theory," Working Papers 200025, School of Economics, University College Dublin.
    9. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, pages 536-561.
    10. 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.
    11. J. Peter Neary, 2016. "International Trade in General Oligopolistic Equilibrium," Review of International Economics, Wiley Blackwell, pages 669-698.
    12. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, pages 1-14.
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    Cited by:

    1. Bertrand Crettez & Marie-Cécile Fagart, 2009. "Does entry improve welfare? A general equilibrium approach to competition policy," Journal of Economics, Springer, pages 97-118.
    2. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    3. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    4. Kenji Fujiwara, 2016. "Trade and FDI liberalization in a general oligopolistic equilibrium," Discussion Paper Series 150, School of Economics, Kwansei Gakuin University, revised Nov 2016.
    5. Yomogida, Morihiro, 2008. "Competition, technology, and trade in oligopolistic industries," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 127-137.
    6. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    7. 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.
    8. Carvajal, Andres & Quah, John K.-H., 2009. "A Nonparametric Analysis of the Cournot Model," The Warwick Economics Research Paper Series (TWERPS) 922, University of Warwick, Department of Economics.
    9. J. Peter Neary, 2006. "Measuring Competitiveness," The Economic and Social Review, Economic and Social Studies, pages 197-213.
    10. 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.
    11. Kikuchi, Toru & Shimomua, Koji, 2008. "Comparative Advantage and Trade Liberalization in a Chamberlinian-Ricardian Model," MPRA Paper 8199, University Library of Munich, Germany.
    12. Roberto Basile & Luca De Benedictis, 2004. "Regional Unemployment and Productivity in Europe and the US," ERSA conference papers ersa04p38, European Regional Science Association.
    13. Yahmed, Sarra Ben, 2017. "Gender wage discrimination and trade openness. Prejudiced employers in an open industry," ZEW Discussion Papers 17-047, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    14. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness. Prejudiced employers in an open industry," Working Papers halshs-00793561, HAL.
    15. Peter Neary, 2009. "Two and a Half Theories of Trade," Economics Series Working Papers 466, University of Oxford, Department of Economics.
    16. Fujiwara, Kenji, 2017. "Trade and FDI liberalization in a general oligopolistic equilibrium," Japan and the World Economy, Elsevier, pages 45-49.
    17. Mulatu, Abay, 2016. "On the concept of 'competitiveness' and its usefulness for policy," Structural Change and Economic Dynamics, Elsevier, vol. 36(C), pages 50-62.
    18. 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.
    19. Sarra Ben Yahmed, 2012. "Gender Wage Discrimination and Trade Openness," AMSE Working Papers 1233, Aix-Marseille School of Economics, Marseille, France.
    20. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.
    21. 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.
    22. Klinger, Bailey & Lederman, Daniel, 2004. "Discovery and development : an empricial exploration of"new"products," Policy Research Working Paper Series 3450, The World Bank.
    23. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.

    More about this item

    Keywords

    Comparative and absolute advantage; Comparative and competitive advantage; Exchange-rate protection; GOLE (General Oligopolistic Equilibrium); Market integration; Comparative advantage (International trade); International trade; Oligopolies; Competition;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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