Trade and Technology: The Ricardian Model - Faculty

More documents

Recommendations

Info

Trade: Comparative advantage International Commercial Policy The Ricardian Model Suppose that Home and Foreign can now trade wine and cheese. Denote Foreign variables by “*” and assume that a LC/ a LW < a * LC/a * LW. This implies that the opportunity cost of cheese production is lower in Home than in Foreign so that Home has a comparative advantage in cheese production. 28 
Trade: Absolute advantage International Commercial Policy The Ricardian Model Notice that we have not specified whether Home has an absolute advantage in cheese or wine production. Home has an absolute advantage in cheese production if aLC < a * LC . Similarly, Home has an absolute advantage in wine production if aLW < a * LW . The distinction between comparative and absolute advantage is fundamental. As we will see, comparative and not absolute advantage determines the pattern of trade and is the source of gains from trade. 29 
Page 1 and 2: Trade and Technology: The Ricardian
Page 3 and 4: Introduction (cont.) International
Page 5 and 6: Opportunity cost International Comm
Page 7 and 8: Opportunity cost (cont.) Internatio
Page 9 and 10: Opportunity cost (cont.) Internatio
Page 11 and 12: Comparative advantage (cont.) Milli
Page 13 and 14: Setup There are two countries: Home
Page 15 and 16: Autarky: Unit labor requirement Int
Page 17 and 18: Autarky: PPF (cont.) 17  Internat
Page 19 and 20: Autarky: PPF (cont.) International
Page 21 and 22: Autarky: Prices and wages Internati
Page 23 and 24: Autarky: Pattern of production (con
Page 25 and 26: Autarky: Equilibrium prices Interna
Page 27: Autarky: Equilibrium prices (cont.)
Page 31 and 32: Trade: Equilibrium prices (cont.) I
Page 33 and 34: Trade: Equilibrium prices (cont.) I
Page 35 and 36: Trade: Equilibrium prices (cont.) 3
Page 37 and 38: Trade: Equilibrium prices (cont.) 3
Page 39 and 40: Trade: Application I 39  Internat
Page 41 and 42: Trade: Application II (cont.) Inter
Page 43 and 44: Trade: Application II (cont.) The a
Page 45 and 46: Trade: Relative wages The observati
Page 47 and 48: Trade: Relative wages (cont.) Suppo
Page 49 and 50: Trade: Relative wages (cont.) Inter
Page 51 and 52: Trade: Relative wages (cont.) Labor
Page 53 and 54: Trade: Gains from trade Internation
Page 55 and 56: International Commercial Policy The
Page 57 and 58: Trade: Gains from trade (cont.) Int
Page 59: International Commercial Policy The

Trade and Technology: The Ricardian Model - Faculty

Create successful ePaper yourself

Delete template?

Save as template?