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IE Labor Productivity and Comparative Advantage EDITED
IE Labor Productivity and Comparative Advantage EDITED
Comparative Advantage:
Ricardian Model
NANG SUAT LAO DONG VA LOI THE SO SANH: MO HINH RICARO
Theo nghia rong hon: thuong mai quoc te la s trao doi hang hoa dich vu, tai nguyen ( von va lao dong) xuyen bien gioi quoc gia
INTERNATIONAL TRADE IN
INTERNATIONAL ECONOMICS
International trade International trade
theories instruments
Lecture 5: Non-tariff
Lecture 3: H-O model
barriers
INTERNATIONAL TRADE THEORIES
ly thuyet thuong mai quoc te tan co dien
ly thuyet thuong mai quoc te co dien
Classical International Neo-classical International
Trade Theory Trade Theory
Heckscher-Ohlin Theory
su giau co cua mot quoc gia duoc do bang tru luong vang va bac
A nation’s wealth is measured by ON TRADE
stock of gold and silver quan diem cua merchantilist's ve thuong mai
khi mot quoc gia co loi the tuyet doi trong san xuat mot mat hang, nhung bat loi tuyet doi so voi quoc gia kia ve mat hang thu hai, thi ca hai quoc gia deu co
the dat duoc loi ich bang cach chuyen mon hoa mat hang co loi the tuyet doi cua minh vao trao doi mot phan san luong de lay hang hoa cua minh bat loi the
tuyet doi
Chuyen mon hoa va thuong mai mang lai loi ich cho ca hai quoc gia
adam sth va cac nha kinh te hoc co dien khac ung ho chinh sach laissez-faire hoac su can thiep toi thieu cua chinh phu vao hoat dong kinh te
• It cannot explain the trade in the case that one country has absolute
advantage in both goods and the other does not have absolute
advantage in any goods.
• The US has absolute advantage in producing both wheat and cloth.
• The UK does have absolute advantage in producing any goods.
3. TRADE BASED ON
COMPARATIVE ADVANTAGE
THUONG MAI DUA VAO LOI THE SO SANH
COMPARATIVE ADVANTAGE
So sanh loi the va chi phi co hoi
AND OPPORTUNITY COST
- Mo hinh ricado: su khac biet ve nang suat L giua cac quoc gia gay ra su khac biet ve nang suat , dan den loi ich
tu thuong mai
-Mo hinh ricardo su dung cac khai niem ve chi phi co hoi va loi the so sanh
• Ricardian model: differences in productivity of L between
countries cause productive differences, leading to gains from
trade.
• Ricardian model uses the concepts of opportunity cost and
comparative advantage.
• The opportunity cost of producing good X is the cost of not
being able to produce good Y because resources have already
been used to produce good X.
Chi phi co hoi cua viec sx hang hoa X la chi phi khong the sx hang hoa Y vi cac nguon luc da duoc su
dung de sx hang hoa X
Copyright © 2009 Pearson Addison-
3-18
Wesley. All rights reserved.
COMPARATIVE ADVANTAGE AND OPPORTUNITY COST
(cont.)
• A country has a comparative advantage in producing a good if the
opportunity cost of producing that good is lower in the country
than it is in other countries.
• A country with a comparative advantage in producing a good uses
its resources most efficiently when it produces that good
compared to producing other goods.
- Mot quoc gia co loi the so sanh trong viec san xuat mot hang hoa neu chi phi co hoi de sx hang hoa do o
nuoc nay thap hon so voi cac nuoc khac
- Mot quoc gia c loi the so sanh trong vie sx 1 hang hoa se su dung cac nguon luc cua minh mot cach hieu
qua nhat khi nuoc do sx ra hang hoa do so voi viec sx ra cac hang hoa khac
– Labour is the only factor in production lao dong la yeu to duy nhat cua sx
Determined comparative
advantage based on
opportunity cost (OC), not
on labor productivity
loi the ss duoc xac dinh dua tren
chi phi co hoi (OC) khong dua
tren nang suat lao dong
Gottfried von Haberler The Theory of International Trade
(1900-1995) (1936)
OPPORTUNITY COSTS
• The opportunity cost of a commodity is the amount of a second
commodity that must be given up to release just enough resources
to produce one additional unit of the first commodity.
• Limited resources -> The trade-off
- Chi phi co hoi cua mot hang hoa la so luong hang hoa thu hai phai tu bo de giai phong vua du nguon luc
de sx them 1 don vi hang hoa thu nhat
- Nguon luc han che -> su danh' doi?
BASIS FOR TRADE
• Basis for trade: Comparative advantage
• A nation has a comparative advantage in a commodity if it can
produce this commodity at a lower opportunity cost than the other
nation.
US UK US UK
W (unit/hour) 6 1 OC of Wheat 2/3C 2C
C (unit/hour) 4 2 OC of Cloth 3/2W 1/2W
*C
*B
*A
X X
• do
• What points
What outside
do points the PPF
outside curve
the PPF (C)(C)
curve represent?
represent?
• do
• What What do points
points insideinside the PPF
the PPF curve
curve (A)(A) represent? ?
represent?
CONTRIBUTIONS AND LIMITATIONS
- xac dinh loi the so sanh du tren chi phi co hoi ( lao dong khong nhat thiet la yeu to sx duy nhat )
CONTRIBUTIONS
• Determining comparative advantage based on opportunity cost
(labor is not necessarily the only factor of production)
• PPF curve and demonstrating the benefits from trade
LIMITATIONS
• Constant opportunity cost
• Have not explained the sources of comparative advantages
- Chi phi co hoi khong doi
- Chua giai thich duoc nguon goc cua loi the ss
SUMMARY
• This chapter examined the development of trade theory from the
mercantilists to Smith, Ricardo, and Haberler and sought to
answer two basic questions:
• (a) What is the basis for and what are the gains from trade? and
• (b) What is the pattern of trade?
• The mercantilists: a nation could gain in international trade only
at the expense of other nations à restrictions on imports,
incentives for exports, and strict government regulation of all
economic activities.
SUMMARY
• Adam Smith: trade is based on absolute advantage and benefits
both nations à trade is positive sum game. Due to some
limitations, absolute advantage explains only a small portion of
international trade today.
• David Ricardo introduced the law of comparative advantage: even
if one nation is less efficient than the other nation in the
production of both commodities, there is still a basis for mutually
beneficial trade. Ricardo, however, explained the law of
comparative advantage in terms of the labor theory of value, which
is unacceptable.
SUMMARY
• Gottfried Haberler: explaining the law of comparative advantage in
terms of the opportunity cost theory.
• A straight-line production possibility frontier reflects constant
opportunity costs.
• With trade, each nation can specialize in producing the commodity
of its comparative advantage and exchange part of its output with
the other nation for the commodity of its comparative
disadvantage à both nations end up consuming more of both
commodities than without trade.
A LOOK AHEAD
In the following lecture, we extend our trade model to more than
one factor of production that helps properly examine the basics of
trade and gains from trade.
H-O MODEL
KEY TERMS
• Absolute advantage, p. 34 • Mercantilism, p. 32
• Basis for trade, p. 31 Complete • Opportunity cost
• specialization, p. 47 • theory, p. 42
• Constant opportunity costs, p. • Pattern of trade, p. 31
43 • Production possibility frontier,
• Gains from trade, p. 31 p. 42
• Labor theory of value, p. 41 • Relative commodity prices, p. 44
• Laissez-faire, p. 35 • Small-country case, p. 47
• Law of comparative advantage,
p. 36