An Elementary Theory of Comparative Advantage
Comparative advantage, whether driven by technology or factor endowment, is at the core of neoclassical trade theory. Using tools from the mathematics of complementarity, this paper offers a simple yet unifying perspective on the fundamental forces that shape comparative advantage. The main resul...
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Format: | Article |
Language: | en_US |
Published: |
Econometric Society
2010
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Online Access: | http://hdl.handle.net/1721.1/51725 https://orcid.org/0000-0002-5503-297X |
Summary: | Comparative advantage, whether driven by technology or factor endowment, is at
the core of neoclassical trade theory. Using tools from the mathematics of complementarity,
this paper offers a simple yet unifying perspective on the fundamental forces
that shape comparative advantage. The main results characterize sufficient conditions
on factor productivity and factor supply to predict patterns of international specialization
in a multifactor generalization of the Ricardian model which we refer to as
an “elementary neoclassical economy.” These conditions, which hold for an arbitrarily
large number of countries, goods, and factors, generalize and extend many results
from the previous trade literature. They also offer new insights about the joint effects
of technology and factor endowments on international specialization. |
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