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Handbook of Trade Policy for Development$
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Arvid Lukauskas, Robert M. Stern, and Gianni Zanini

Print publication date: 2013

Print ISBN-13: 9780199680405

Published to Oxford Scholarship Online: January 2014

DOI: 10.1093/acprof:oso/9780199680405.001.0001

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Comparative Advantage: The Ricardian and Heckscher–Ohlin Theories

Comparative Advantage: The Ricardian and Heckscher–Ohlin Theories

(p.89) Chapter 4 Comparative Advantage: The Ricardian and Heckscher–Ohlin Theories
Handbook of Trade Policy for Development

Arvind Panagariya

Oxford University Press

Arvind Panagariya analyses the Ricardian theory of comparative advantage and its reformulation in the leading modern theory of international trade, Heckscher-Ohlin. He examines the logic of comparative advantage, demonstrating that if a country specializes in the good that it produces relatively more efficiently and trades it for the good it produces relatively inefficiently, it will benefit, as well as the proposition that free trade will leave both countries at least as well off as in its absence. The core concept of comparative advantage has formed the basis for much modern trade theory, notably the influential Heckscher-Ohlin model. Panagariya examines the central finding of the model, which is that each country exports the good that uses its abundant factor more intensively and imports the good that uses its scarce factor more intensively, as well as the key theorems (Stolper-Samuelson, Rybczynski, and Factor Price Equalization) derived from the basic framework.

Keywords:   Comparative advantage, Ricardo, Heckscher-Ohlin, trade theory, Stolper-Samuelson, Rybczynski, factor price equalization

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