Source of comparative advantage, International Economics

 

The Source of Comparative Advantage can be understood as follows:

The source of comparative advantage could be productivity differential (Ricardo) or differences in the factor endowments (Hechshcer-Ohlin). In the latter case, given the two countries (one rich in labor and one rich in capital, and a labor-intensive good and a capital intensive good, the labour abundant country will have comparative advantage in production of the labour-intensive good while on the other hand the capital abundant country will have comparative advantage in the capital-intensive good.

The natural policy prescription emanating from above argument was that the LICs which are often abundant in labor should produce primary products while rich countries alone must produce capital-intensive goods.

 

 

Posted Date: 7/19/2012 4:16:24 AM | Location : United States







Related Discussions:- Source of comparative advantage, Assignment Help, Ask Question on Source of comparative advantage, Get Answer, Expert's Help, Source of comparative advantage Discussions

Write discussion on Source of comparative advantage
Your posts are moderated
Related Questions
Q. What are the three types of transactions between the residents of different countries? Answer: 1. Trades of services and goods for goods or services. 2

INTERNATIONAL FINANCE International finance is concerned with the mobility of financial capital across the countries,  and  the  problems  and  opportunities  this  mobility  p

why is international trade important for south africa

Q. It is argued that import substitution is a misguided trade policy if the intent is to show long-term economic growth. Illustrate the reasons underlying this argument. Answe


Why Adam Smith theory cannot be applicable?

Q. How did the international monetary system influence macroeconomic policy-making and performance during the gold standard era (1870 - 1914)? Answer: London was the hub of t



what are the theories supporting protectionism