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Trade and Technology: The Ricardian Model - Faculty

Trade and Technology: The Ricardian Model - Faculty

Trade:

Trade: Common misconceptions International Commercial Policy The Ricardian Model 1. Trade is beneficial only if your country is strong enough to stand up to foreign competition. 2. Trade cannot be beneficial if it leads to job losses in some industries. 3. Trade with countries that pay low wages hurts high wage countries and is unfair. 4. Trade exploits a country and makes it worse off if its workers receive much lower wages than workers in other nations. 58


International Commercial Policy The Ricardian Model Trade: Common misconceptions (cont.) Gains from trade depend on comparative not absolute advantage. Wages adjust to account for absolute advantage. In “Ricardo’s Difficult Idea”, Krugman provides some reasons why comparative advantage is often ignored or misunderstood. 59


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