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Law of Comparative Advantage |
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Law of Comparative AdvantageThe 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).Similar MatchesComparative advantageComparative advantageThe 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). Kaleidoscope comparative advantageKaleidoscope comparative advantageA variant of fragmentation due to Bhagwati and Dehejia (1994). Dynamic comparative advantageDynamic comparative advantageA changing pattern of comparative advantage over time due to changes in factor endowments or technology. Revealed comparative advantageRevealed comparative advantageBalassa'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 market analysisComparative market analysisAn estimate of the value of a property based on an analysis of sales of properties with similar characteristics. Further SuggestionsComparative staticComparative credit analysis Comparative advantage Chain of comparative advantage |
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