Comparative Advantage

Revealed Comparative Advantage and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Revealed Comparative Advantage: A measure of relative competitive performance of a country's exporters of a particular product or class of goods. Calculated by dividing the country's share of world exports of the product in question by the country's share of total world trade. Products having a ratio greater than one may be considered indicative of the country's underlying comparative advantage,relative to products with ratios less than one. In this way, the measure takes into account competitive factors (such as the exchange rate) that affect the country's exporters as a whole; it also yields results that are scaled in a way that permits comparison between countries of different sizes. However , other factors –especially competitive policies and practices in the exporting country, and trade barriers protecting foreign markets –can significantly distort the results.

Comparative Advantage and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Comparative Advantage: Relative efficiency in production of one particular product or class of goods over another class of goods. Differences in comparative advantage among countries are the basis for mutually beneficial specialization and trade. (Not to be confused with absolute advantage,in which comparison is made with other countries; for, even if a country were absolutely more efficient than others in producing every product, it could still benefit by specializing' in –and exporting –products in which its comparative advantage is highest, and importing the other products.) In principle, an international trading system organized around the concept of comparative advantage should increase worldwide efficiency and standards of living. In this sense, it is the basis for viewing international trade as a “win-win proposition” rather than the “winners and losers” model assumed by mercantilism. See also terms of trade; free trade, industrial policy; and inter/intra-industry trade.

Comparative Advantage in International Trade

Meaning of Comparative Advantage, according to the Dictionary of International Trade (Global Negotiator): A central concept in international trade which holds that a country or region should specialize in the production and export of those goods and services that it can produce relatively more efficiently that others goods or services, and import those goods and services in which it has a comparative disadvantage. This theory was first propounded by the British economist David Ricardo in 1817 as a basis for increasing the economic welfare of a population through international trade. The comparative advantage theory normally favours specialized production in a country based on intensive utilization of those factors of production in which the country is relatively well endowed (such as raw materials, fertile land or skilled labour). See also absolute advantage.

Concept of Comparative Advantage

An introductory definition of Comparative Advantage is provided here: Doctrine says that states should 1) produce and export whatever they can produce most efficiently relative to other states i.e., whatever they have a comparative advantage in; and they should 2) import those things they can't produce as efficiently from states that can

Concept of Comparative Advantage

Note: explore also the meaning of this legal term in the American Ecyclopedia of Law.

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• Political Economy
• Public Policy

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• Foregin Policy
• Foreign Affairs

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• International Trade
• Trade Regulation
• International Economic Law
• Export License
• International Trade Law
• Foreign Trade
• Safeguard