Can Ricardian Model Really Explain Trade?

2021 ◽  
Vol 3 (1) ◽  
pp. 21
Author(s):  
Kok Wooi Yap ◽  
Doris Padmini Selvaratnam
Keyword(s):  
International Trade ◽  
Palm Oil ◽  
Comparative Advantage ◽  
Real World ◽  
Trade Theory ◽  
The Real ◽  
Ricardian Model ◽  
Ricardian Trade Theory ◽  
Factors Of Production

This paper aims to analyse the international trade in the real world by applying the Ricardian trade theory. In doing this, simple comparative advantage assumptions are used to examine trading of palm oil and rice between Malaysia and Vietnam. By using this theory, it is proven that international trade takes place because of efficiency to produce exported product. A country will export products that use its abundant and cheap factors of production and import products that use its scarce factors. Various empirical evidences of previous studies are als o used to discuss the importance of the Ricardian model. However, it is also highlighted in the paper that the Ricardian model could be misleading as it has several limitations that restrict its usefulness.

scholarly journals Putting Ricardo to Work

2012 ◽  
Vol 26 (2) ◽  
pp. 65-90 ◽  
Author(s):  
Jonathan Eaton ◽  
Samuel Kortum
Keyword(s):  
International Trade ◽  
Comparative Advantage ◽  
International Economy ◽  
Trade Theory ◽  
Center Stage ◽  
Ricardian Model ◽  
New Generation ◽  
David Ricardo

David Ricardo (1817) provided a mathematical example showing that countries could gain from trade by exploiting innate differences in their ability to make different goods. In the basic Ricardian example, two countries do better by specializing in different goods and exchanging them for each other, even when one country is better at making both. This example typically gets presented in the first or second chapter of a text on international trade, and sometimes appears even in a principles text. But having served its pedagogical purpose, the model is rarely heard from again. The Ricardian model became something like a family heirloom, brought down from the attic to show a new generation of students, and then put back. Nearly two centuries later, however, the Ricardian framework has experienced a revival. Much work in international trade during the last decade has returned to the assumption that countries gain from trade because they have access to different technologies. These technologies may be generally available to producers in a country, as in the Ricardian model of trade, our topic here, or exclusive to individual firms. This line of thought has brought Ricardo's theory of comparative advantage back to center stage. Our goal is to make this new old trade theory accessible and to put it to work on some current issues in the international economy.

Trade and Spatial Growth

2017 ◽  
Vol 18 (1) ◽  
pp. 94-111
Author(s):  
Sirimal Abeyratne ◽  
N. S. Cooray
Keyword(s):  
International Trade ◽  
Comparative Advantage ◽  
Global Economy ◽  
Spatial Concentration ◽  
Trade Theory ◽  
Missing Link ◽  
Spatial Growth

Comparative advantage is based on ‘locational factors’ so that trade leads to growth and its spatial concentration. Until recently, the nexus between trade and spatial growth received little space within trade analyses though it did not appear to be a missing link in initial contributions to trade theory. The reshaping of the global economy with greater integration has called for analyses of trade and spatial growth. This article examines theoretical premises of the link between international trade and spatial growth, and the implications of reshaping of the global economy for the study of spatial growth within trade theory.

scholarly journals Competitiveness of Palm Oil Products in International Trade: An Analysis between Indonesia and Malaysia

2020 ◽  
Vol 35 (2) ◽  
pp. 157
Author(s):  
Muhammad Arsyad ◽  
Achmad Amiruddin ◽  
Suharno Suharno ◽  
Siti Jahroh
Keyword(s):  
International Trade ◽  
Palm Oil ◽  
Comparative Advantage ◽  
Palm Olein ◽  
Oil Products ◽  
Positive Trend ◽  
Rbd Palm Olein ◽  
Group A ◽  
Strategic Policies ◽  
Derivative Products

The supply of palm oil products is still a central issue in international trade. Indonesia and Malaysia are major suppliers, contributing around 85% of world palm oil. Hence, both countries have an important role, as well as competing with each other in international trade. The palm oil products usually in high demand worldwide include Crude Palm Oil (CPO), which is the main and its derivative products such as Refined Bleached Deodorized (RBD) palm olein and Palm Fatty Acid Distillate (PFAD). Therefore, the research aims at assessing the competitiveness of palm oil products between Indonesia and Malaysia in international trade. The Revealed Comparative Advantage (RCA) and products mapping methods were used in this assessment. The results show that, the value of RCA of Indonesian CPO showed a negative trend, although, still higher than Malaysia, though with positive trend. However, Indonesian RBD palm olein and PFAD have a positive trend compared with Malaysia. Upon using the method of products mapping, it was found that, the palm oil products of both countries were in group A. This is an indication that the products have comparative advantage and export specialization. Therefore, there is need for strategic policies, in both countries, for supporting oil palm activities at the downstream. This will enhance the production of derivative products with the capacity of also meeting demands in the international trade.

scholarly journals Comparative Advantage and Optimal Trade Policy *

2015 ◽  
Vol 130 (2) ◽  
pp. 659-702 ◽  
Author(s):  
Arnaud Costinot ◽  
Dave Donaldson ◽  
Jonathan Vogel ◽  
Iván Werning
Keyword(s):  
Trade Policy ◽  
Comparative Advantage ◽  
Trade Theory ◽  
The Core ◽  
Export Subsidies ◽  
Ricardian Model ◽  
Optimal Trade Policy

Abstract The theory of comparative advantage is at the core of neoclassical trade theory. Yet we know little about its implications for how nations should conduct their trade policy. For example, should import sectors with weaker comparative advantage be protected more? Conversely, should export sectors with stronger comparative advantage be subsidized less? In this article we take a first stab at exploring these issues. Our main results imply that in the context of a canonical Ricardian model, optimal import tariffs should be uniform, whereas optimal export subsidies should be weakly decreasing with respect to comparative advantage, reflecting the fact that countries have more room to manipulate prices in their comparative-advantage sectors. Quantitative exercises suggest substantial gains from such policies relative to simpler tax schedules.

scholarly journals Ricardo and Haberler: an essay on the evolution of the economic thought based on the four magic numbers in the international trade theory

2021 ◽  
Vol 38 (77) ◽  
pp. 171-185
Author(s):  
Flavia Poinsot
Keyword(s):  
International Trade ◽  
Comparative Advantage ◽  
Labor Cost ◽  
Economic Thought ◽  
Magic Numbers ◽  
Trade Theory ◽  
International Trade Theory ◽  
New Research ◽  
Over Time

The Ricardian comparative advantage is one key cornerstone in the international trade theory. There is no shortage of textbooks supposing that Ricardo used solely labour as a factor of production. This approach originates with Haberler in the 1930s, who wrote that Ricardo’s theory of comparative advantage is robust, but not the labor-cost doctrine, which, Haberler assumed, Ricardo applied. This paper summarizes why Haberler’s perspective emerged, essaying an explanation of his way of interpreting Ricardo. To do this, we considered the new research on Ricardo, whose facets to be known seem to renew over time and never end.

Book Reviews

2011 ◽  
Vol 49 (1) ◽  
pp. 143-146
Keyword(s):  
International Trade ◽  
General Equilibrium ◽  
Labor Markets ◽  
Real World ◽  
Economic Models ◽  
Equilibrium Models ◽  
Equilibrium Unemployment ◽  
General Equilibrium Models ◽  
The Real

Chong Xiang of Purdue University and NBER reviews “International Trade with Equilibrium Unemployment” by Carl Davidson and Steven J. Matusz. The EconLit Abstract of the reviewed work begins, “Considers how to create economic models that accurately reflect the real-world connections between international trade and labor markets using equilibrium unemployment modeling. Discusses the structure of simple general equilibrium models with frictional unemployment; trade and search-generated unemployment….”

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