Why Countries Trade: The Theory of Comparative Advantage

  • Reference: DARDEN-G-0594-E

  • Number of pages: 6

  • Publication Date: Aug 10, 2007

  • Fecha de edición: Apr 5, 2021

  • Source: Darden University of Virginia (USA)

  • Type of Document: Technical Note

  • Industry Setting: N/A

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Description

The theory of comparative advantage is a surprisingly common-sense idea, but it is often misunderstood. In this technical note, the basic theory of comparative advantage is presented with an example that drives home its logic when there are technological differences between countries. In addition, we look at some extensions that specify other sources of comparative advantage, as well as some related theories.

Keywords

Comparative advantage Competition Heckscher-Ohlin International trade Rybczynski effect Stolper-Samuelson result Trade