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Trade and Technology: The Ricardian Model - Faculty

Trade and Technology: The Ricardian Model - Faculty

Introduction Countries

Introduction Countries trade either because they are different from one another or because of increasing returns to scale. Countries may differ from one another in terms of technology, endowments, or preferences. The Ricardian model emphasizes technological differences. 2
 International Commercial Policy The Ricardian Model

Introduction (cont.) International Commercial Policy The Ricardian Model Despite its simplicity, the Ricardian model allows us to illustrate several fundamental insights of international trade theory. Most importantly, it allows us to think clearly about the concepts of absolute and comparative advantage and their roles in determining the pattern of trade and the gains from trade. In “The Accidental Theorist”, Krugman nicely illustrates the usefulness of simple models. 3


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