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Trade and Technology: The Ricardian Model - Faculty

Trade and Technology: The Ricardian Model - Faculty

Trade:

Trade: Relative wages (cont.) International Commercial Policy The Ricardian Model Thus, relative wages reflect relative productivities of the two countries. Is this an accurate prediction? Some argue that low wage countries pay low wages despite growing productivity, putting high wage countries at a cost disadvantage (more on this soon). But the evidence shows that low wages are associated with low productivity. 50


Trade: Relative wages (cont.) Labor Productivity and Wages, 2001 International Commercial Policy The Ricardian Model Note: Labor productivity is measured as value added per hour, where value added is defined as revenue minus the cost of intermediate inputs. 51


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