The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Ricardian Trade Theory

  • Kiminori Matsuyama
Reference work entry


Ricardian trade theory takes cross-country technology differences as the basis of trade. By abstracting from the roles of factor endowment and factor intensity differences, which are the primary concerns of factor proportions theory, Ricardian trade theory offers a simple and yet powerful framework within which to examine the effects of country sizes, of technology changes and transfers, and of income distributions. Moreover, its simple production structure makes it relatively easy to allow for many goods and many countries, and hence capable of generating valuable insights which are lost in the standard two-country, two-sector model of international trade.


Absolute advantage Cobb–Douglas functions Comparative advantage Constant returns to scale Diminishing returns to scale Export-based and import-biased technology Export subsidies Factor endowment Factor intensity Factor proportions Gains from trade Globalization Iceberg costs Immiserizing growth Increasing returns to scale International trade North–South trade Product cycles Productivity growth Ricardian trade theory Size of nations Specific factor models Structural change Technical change Terms of trade Trade costs Trade, technology diffusion and growth Transfer of technology Transfer problem 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Kiminori Matsuyama
    • 1
  1. 1.