Dynamic comparative advantage


 

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Dynamic comparative advantage

A changing pattern of comparative advantage over time due to changes in factor endowments or technology.



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Comparative advantage

Comparative advantage

The ability to produce a good at lower cost, relative to other goods, compared to another country. In a Ricardian model, comparison is of unit labor requirements; more generally it is of relative autarky prices. With perfect competition and undistorted markets, countries tend to export goods in which they have comparative advantage. See also absolute advantage. Due to Ricardo (1815).


Revealed comparative advantage

Revealed comparative advantage

Balassa's (1965) measure of relative export performance by country and industry, defined as a country's share of world exports of a good divided by its share of total world exports. The index for country i good j is RCAij = 100(Xij /Xwj)/(Xit /Xwt) where Xab is exports by country a (w=world) of good b (t=total for all goods).


Comparative advantage

Comparative advantage

Theory suggesting that specialization by countries can increase worldwide production.


Chain of comparative advantage

Chain of comparative advantage

A ranking of goods or countries in order of comparative advantage. With two countries and many goods, goods can be ranked by comparative advantage (e.g., by relative unit labor requirements in the Ricardian model). A country's exports will then lie nearer one end of the chain than its imports. With two goods, many countries can be ordered similarly.


Law of Comparative Advantage

Law of Comparative Advantage

The principle that, given the freedom to respond to market forces, countries will tend to export goods for which they have comparative advantage and import goods for which they have comparative disadvantage, and that they will experience gains from trade by doing so. Idea due to Ricardo (1815).


Further Suggestions

Comparative market analysis
Comparative credit analysis
Kaleidoscope comparative advantage
Comparative static


 
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