A Dynamic Concept of Comparative Advantage: Technological Capabilities and Trade Theories
In the last few years, classical, Ricardian and neoclassical theories of international trade have gradually been complemented with new hypotheses and assumptions, to explain a pattern of trade that has changed, often along unexpected lines. The earlier ‘conventional’ theories had difficulties in explaining the changing pattern of comparative advantage (CA) with new exporters from less developed countries (LDCs) and countries shifting their CA through different activities. In response to this, the idea that CA not only reflects the static endowment of given national resources, but is constantly changing in response to the creation of local knowledge and skills, has been explicitly considered. Similarly, the hypothesis that efforts to develop skills and capabilities can add to the country’s endowments and enhance the effective utilization of the endowments already available has been explored in the literature.
KeywordsTechnological Change Comparative Advantage Market Failure Technological Capability Factor Endowment
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