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Trade and Technology: The Ricardian Model - Faculty

Trade and Technology: The Ricardian Model - Faculty

Trade:

Trade: Application III 44
 International Commercial Policy The Ricardian Model

Trade: Relative wages The observation that comparative advantage and not absolute advantage determines the pattern of trade does not imply that absolute advantage is unimportant. This is because productivity differences play an important role in determining relative wages, i.e. the wages of the domestic country relative to the foreign country, in the Ricardian model. Let’s consider a numerical example. 45
 International Commercial Policy The Ricardian Model

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